OULU BUSINESS SCHOOL
Le Bei Sze
MALAYSIAN SMES INTERNATIONALIZATION THROUGH NETWORKS APPROACH
Master’s Thesis
International Business Management
March 2019
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UNIVERSITY OF OULU ABSTRACT OF THE MASTER'S THESIS
Oulu Business School
Unit
Department of Marketing Management and International Business Author
Le Bei Sze Supervisor
Professor Dr. Vesa Puhakka Title
Malaysian SMEs Internationalization Through Networks Approach Subject
International Business Type of the degree
Master’s Thesis Time of publication
March 2019 Number of pages
90 Abstract
In Malaysia, 98.5 per cent of business incorporation is related to small and medium-sized enterprises
(SMEs). SMEs had contributed 36.6 per cent of the total gross domestic product in 2016, and it is
expected to increase to 41 per cent in 2020. Importantly, Malaysian SMEs create 65 per cent of
employment opportunities, and around 20 per cent of the Malaysian SMEs are actively operating their
businesses with international partners or clients—internationalization.
Although building and managing network relationship has been view as one of the most important ways
to ensure the business sustainability in Malaysia, and yet, most of the Malaysian SMEs entrepreneurs
are not equipped with a fundamental knowledge of networks in business management. Generally, the
Malaysian SMEs entrepreneurs gain networks knowledge through practice, which means that they learn
of how to develop, coordinate, and maintain a network relationship via trial and error approach.
Undeniably, the trial and error approach is considered a meaningful learning process in business
management. Notwithstanding, such a strategy is relatively risky and improper to be applied on
internationalization. The reason given is that operating in the international market is more challenging
than running a business in the domestic market; the Malaysian SMEs entrepreneurs may face many
uncertainties in the global market without proper networks, such as customer needs, distribution
channel, legislation, and so on. Thus, the objective of this thesis serves to answer:
1) How do networks affect Malaysian SME entrepreneurs to discover international opportunities
and to operate their business in the international markets?
2) During the internationalization, what are the influences of networks on Malaysian SME
entrepreneurs’ knowledge, experience, and future business ideas?
The current thesis used Gioia methodology, a systematic inductive approach and rigorous qualitative
method to develop the empirical model. Five companies from different industry were selected for the
interview, including instant beverage, restaurant, bird’s nest supply, design and printing services, and
hardware trading.
This thesis contributes to the current literature of the Malaysian SMEs by integrating business network
internationalization process model (Johanson & Vahlne 2009) and guanxi (i.e., personal relationship).
In this regard, the Malaysian SME entrepreneurs are more focusing on the development of guanxi for
the sustainability of businesses. In term of managerial implications, entrepreneurs could benefit from
knowing how to make a prospect list of global markets and manage international network relationships.
The findings of this thesis also important to Malaysian government and institutions; it could be served
as a blueprint to plan and design a better training programme for the Malaysian SME entrepreneurs,
such as the art of turning a business partnership into a personal relationship. Keywords
Networks, Internationalization, Malaysian SMEs, Entrepreneurs, Guanxi, Gioia methodology Additional information
N/A
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CONTENTS
1 INTRODUCTION............................................................................................... 6
1.1 Research background ................................................................................ 6
1.1.1 Internationalization in emerging market ........................................... 6
1.1.2 Ecosystem of Malaysia entrepreneurship and SMEs ........................ 7
1.1.3 Malaysia international business ...................................................... 10
1.1.4 Network approach in emerging countries ....................................... 11
1.1.5 Existing research studies of Malaysian SMEs internationalization
through networks ............................................................................ 12
1.2 Research gap and purpose of study ........................................................ 13
1.2.1 Significance of the research ............................................................ 16
1.3 Structure of the thesis .............................................................................. 16
2 LITERATURE REVIEW ................................................................................ 18
2.1 Internationalization.................................................................................. 18
2.2 Network theory ......................................................................................... 21
2.2.1 Network theory of internationalization ........................................... 22
2.2.2 The business network of internationalization process model
(revisited) ....................................................................................... 27
2.2.3 Guanxi—Social network ................................................................. 31
2.3 Malaysian SMEs internationalization .................................................... 35
2.3.1 Theories of Malaysian SMEs internationalization .......................... 36
3 RESEARCH METHODOLOGY .................................................................... 41
3.1 Method ...................................................................................................... 41
3.2 Data collection and Analysis Method ..................................................... 42
3.3 The background of firms ......................................................................... 44
3.3.1 Company A ..................................................................................... 45
3.3.2 Company B ..................................................................................... 45
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3.3.3 Company C ..................................................................................... 46
3.3.4 Company D ..................................................................................... 46
4 FINDINGS ......................................................................................................... 48
4.1 Opportunities in international market ................................................... 49
4.2 Operation of international markets ........................................................ 54
4.3 Knowledge and experiences .................................................................... 58
4.4 Network relationships .............................................................................. 61
4.5 The future of international markets ....................................................... 64
5 DISCUSSION .................................................................................................... 67
5.1 Key results................................................................................................. 67
5.2 Theoretical contributions ........................................................................ 73
5.3 Managerial implications .......................................................................... 76
5.4 Limitations and suggestion for future research .................................... 77
5.5 Assessment of validity and reliability ..................................................... 78
6 REFERENCES .................................................................................................. 80
7 APPENDIX ........................................................................................................ 90
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FIGURES
Figure 1. The basic mechanism of internationalization: state and change aspects (Johanson
& Vahlne 1977). ........................................................................................................................... 20
Figure 2. Internationalisation and the network model ............................................................ 25
Figure 3. The business network internationalization process model (the 2009 version) ....... 28
Figure 4. The Uppsala model of MBA evolution (Vahlne & Johanson 2013) ........................ 29
Figure 5. The defintion of Malaysian SMEs (SMECorp 2018) ............................................... 36
Figure 6. The model of influential factors affecting SME internationalization (Senik et al.
2010) ............................................................................................................................................. 37
Figure 7. SMEs networking linkages and functions in internationalization process in
Malaysia (Senik et al. 2011) ........................................................................................................ 38
Figure 8. Learning processes of Malaysian SMEs associated with international sourcing,
export, and connections between inward and outward internationalization (Anuar 2018) . 40
Figure 9. Background of selected companies ............................................................................ 47
Figure 10. Data structure ........................................................................................................... 49
Figure 11. The internationalization of Malaysian SMEs through networks approach ......... 67
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1 INTRODUCTION
The core idea of Chapter 1 is to explain the purpose of this thesis. Specifically, this
chapter starts with a research background that identifies the research gaps of the
Malaysian small and medium-sized enterprises (SMEs) internationalization. First, the
importance of emerging market is presented in a broad view, followed by illustrating
the ecosystem, Malaysian international business, and existing research findings and
limitations of the Malaysian SMEs internationalization. The chapter later concludes
with the significance of this research and the thesis structures are presented.
1.1 Research background
1.1.1 Internationalization in emerging market
World trade has begun in a couple of centuries; based on the historical data. World
trade was rise and fall. It has been consistently low at 1500 – 1800 (Estevadeordal,
Frantz & Taylor 2003). After the Second World War, the global trade started growing.
The rate of growth has increased continuously and grew faster over the last two
centuries. The expansion of trade across the global was fast in the previous few
decades. Besides, the constant technology development in communication and
transportation have reduced the costs and risks which lead to the expansion of trading
across countries. Ortiz-Ospina, Beltekian and Roser (2018) stated that the total exports
and imports between nations is more than 50% of the global production recently as
compared to the 19th century, that was below 10%.
Presently, the global marketplace has become more interconnected and accessible
(Hult News 2016). Newspapers and media publish daily news and articles regarding
business issues. There are increasing numbers of firms cross-border to perform their
businesses. Ortiz-Ospina, Beltekian and Roser (2018) highlighted that the trading
between emerging economies is becoming significant. The share of world merchandise
trade revealed that the trading of emerging economies had increased more than tripled
from 1980-2011. The trading in between advances and developing economies has
gradually increased. Helpman, Melitz and Rubinstein (2007) pointed out that bilateral
trade is increased and more constant than unilateral from 1970 to 1997, which means
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more countries participated trading in both directions. They export goods to a country
and at the same time import products from that country. The bilateral trading leads to
growth in international trade. In with regards, Fayolle, Liñán and Paul (2017) stated
that the bilateral trade agreements between countries had encouraged SMEs to
internationalization.
One example of bilateral trading can be illustrated to the phenomenon between the
United States (U.S.) and China. In the last two decades, China is considered the key
driver of the emerging economies, and China is the world’s second-largerst economy
behind the U.S. (Niriella 2018). U.S.-China have a strong business connection, for
example, General Motors has heavily invested in China, and the company sold more
cars annually in the Chinese market than the United States since 2010. Besides, the
U.S. imports many low-cost products from China which could benefit the U.S.
customers (Every CRS Report 2018). Recently, the trade war between U.S.-China has
become more intense than ever under the leadership of president Donald Trump (Bryan
2018). Since then, Chinese president Xi Jinping has put more concentration on
building the business relationship with non-American countries, especially with the
South Asian emerging countries (Khan 2018). Thus, apart from focusing on the market
of developed countries, SMEs of developing countries also expand their business in
emerging foreign market. For instance, the Malaysian SMEs have been beneficial in
business expansion to the Chinese market under the Belt and Road Initiative (Koh
2017), and The Secretariat for the Advancement of Malaysian Entrepreneurs have
provided supports to SMEs in regards to this initiative at the multilingual one-stop
center that located in Putrajaya, Malaysia.
1.1.2 Ecosystem of Malaysia entrepreneurship and SMEs
Today, the development of entrepreneurship and SMEs are crucial for Malaysian
government as it increases the level of the Malaysian economy and also assists in
leading Malaysia to be a high-income nation (SME Annual report 2015/16). Among
the few economies in the Asian region, Malaysia is a country which has the extensive
favorable infrastructure (i.e., financial and physical) and business advisory services
(Ariff & Abubakar 2002) in supporting businesses operation among the Malaysian
entrepreneurs. The existing entrepreneurship ecosystem include 1) policy development
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2) financing and guarantee schemes 3) business registration and licensing 4) startup
and incubation 5) outreach and awareness programmes and 6) information and
advisory services. Such an ecosystem plays significant roles in ensuring a
comprehensive approach to entrepreneurship and SME development (SME Annual
report 2015/16). Besides, the Malaysian government has formed the Small and
Medium Industries Development Corporation for coordinating the development of
SMEs. It provides advisory services and training and development programmes for
building and improving the capacity and ability of SMEs (Malaysia South-South
Association 2018).
Malaysia has been known as a historical trading center and strategically located
country which is closed to Singapore, Thailand, Vietnam, Brunei, Indonesia, and
Philippines (Dunseith 2017). In 2016, Port Klang, Malaysia is ranked eleven busiest
container port in the world and the second largest port in term of container handling in
Southeast Asia (Salikha 2018).
As Malaysia is a strategically located country which is closed to Singapore, Malaysia
government actively recognizes and takes advantage of its neighbor country resources
such as funding, talent, and mobility. For instance, Iskandar Malaysia is a unique
economic region which knowns for the main southern development corridor in Johor,
Malaysia. The distance from Johor to Singapore is about 15 kilometers. Iskandar
Malaysia has become an excellent position for foreign companies to invest as it has
plenty of land and tax incentives (Pasquier 2014). Iskandar Regional Development
Authority (2015) showed that the top five countries invested in Iskandar Malaysia from
January to September 2014, including Singapore, the U.S., Spain, Japan, and China.
The establishment of the Ministry of Entrepreneur Development in 1995 presented the
government highly concerned about the entrepreneur development and the issues of
entrepreneurship (Ariff & Abubakar 2002). In 2014, the Malaysian Global Innovation
and Creativity Centre (MaGIC) was launched to aim for a sustainable entrepreneurship
ecosystem. This collaboration between the Malaysia government and the U.S.
government serves to provide a one-stop startup service for Malaysia entrepreneurs,
including funding, incubators, intellectual property registration, mentoring, and
e@Stanford Program–a two-week immersive innovation and entrepreneurship
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program at Stanford University and Silicon Valley (MaGIC 2018). With the assistance
of MaGIC, the Malaysian entrepreneurs could enhance their management skills,
knowledge, and shorten the period in building their startup businesses.
Pasquier (2014) highlighted that Malaysia possesses a well successful startup history
because of low-cost entry, well-connected regional hub, and proactive support from
the government. Therefore, there are many successful startup stories in Malaysia. For
example, iCarAsia that provides a platform for car buyers and sellers to get connected
quickly and conveniently within the Southeast Asian countries. Recently, the site has
more than 8 million monthly car buyers, and enthusiasts visit (iCarAsia 2018).
Malaysia has a good startup reputation; Pasquier (2014) showed that four out of five
of the top technology startups existing in Southeast Asia are formed by or with
Malaysians, or either by Malaysian-listed company.
The World Bank (2018) showed that Malaysia is ranked twenty-fourth among one
hundred ninety countries for “ease of doing business” in 2018. Malaysia offers various
business benefits for local and foreign business entrepreneurs. For example, Labuan
jurisdiction is one of the excellent platforms for foreigners to form their business in
Malaysia with preserving of full ownership and enjoy from low startup cost.
According to the Global Entrepreneurship Monitor Report (SME Annual report
2015/16), Malaysia is ranked sixth out of sixty countries in term of the motivational
index. The reason given is that Malaysian entrepreneurs choose to seek opportunity
according to their entrepreneurial self-motivation and passionate about their business
ideas. Although failure is a typical process of entrepreneurs before succeeding in their
business, the fear of failure is a challenge which deters a Malaysian to become an
entrepreneur and to venture in an industry (SME Annual report 2015/16). Sipola
(2015) stated that startups with high risk and high potential are usually lack of certainty
and experimental; therefore, business mistakes and failures are usual. Remarkably, the
percentage of Malaysian in fear of failure has been decreasing from 65% to 27.1% in
2009 to 2016 (SME Annual report 2015/16). These two indications have shown that a
positive outcome of the ecosystem of entrepreneurship and SMEs in Malaysia and the
optimistic attitude towards entrepreneurship among Malaysian.
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1.1.3 Malaysia international business
Ariff and Abubakar (2003) highlighted that Malaysia possesses a vigorous
entrepreneurial base with an immense possibility to turn into a global player. The
former and current policies have nurtured successful entrepreneurs; there are more
Bumiputras get involved in business and entrepreneurship as compared to the previous
two decades. Bumiputra is a Malay word which refers to an ethnic group of Malay and
natives of Sabah and Sarawak in Malaysia (The Star Online 2017). For non-
Bumiputera companies (i.e., mostly Chinese), they are expanding and reaching abroad.
It is a sign to show that Malaysian companies can succeed in the global arena. For
instance, Malaysia is the top ten largest exports of furniture in the world with exports
around eighty percent of its production. Malaysia has a strong position in the global
furniture industry with essential markets in the U.S., Australia, and Japan (Malaysian
International Furniture Fair 2018). Most of the furniture firms in Malaysia is
established by Chinese ethnic.
In 2016, Malaysia is recognized as the eighteenth largest exporter in the world (The
Observatory of Economic Complexity 2018). The major exports products include 1)
electrical and electronic products 2) petroleum products 3) chemicals and chemical
products 4) manufacturers of metal 5) palm oil and 6) machinery equipment and parts
(Malaysia External Trade Development Corporation - MATRADE 2018). According
to MATRADE (2018), there is an increase in total export from MYR786.96 billion to
MYR935.39 billion in between 2016 and 2017. The major export countries of
Malaysia include Singapore (14.5%), China (13.5%), the U.S. (9.5%), Japan (8%),
Thailand (5.4%), Hong Kong (5.1%), Indonesia (3.7%), India (3.7%), Australia
(3.5%), South Korea (3.1%) and the remaining 30.1% is related to other countries.
Thus, the Asia countries have been considered important internationalization of
Malaysia as they accounted for more than 57% of export volume.
Although Malaysia has performed well in exporting, the government still intends to
improve the export rate of Malaysia; therefore, MATRADE aims to increase a five
percent in exports of lifestyle products which including textiles, apparel, accessories,
and furniture (The Star Online 2018). Through this, it offers a way to encourage SMEs
to expand more to the Southeast Asian and foreign markets.
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1.1.4 Network approach in emerging countries
Despite existing research on networks of internationalization (i.e., network approach
to internationalization), the empirical evidence in emerging countries is still limited
(Ghauri, Lutz & Tesfom 2003). Zeng and Williamson (2003) highlighted that many
Asia developing countries are looking for sustainable networks to become globally
competitive firms. Those Asian firms are keen to networks and actively look for
external relationships, ultimately they are able to gain the latest information and
maintain their competitiveness in international markets (Zhou & Xin 2003; Tambunan
2008).
Generally, firms tend to build and maintain their network relationships with their
business partners either inside or outside the country as they know that this could
benefit them. From the previous research, most of the Malaysian firms rely on the
network relationships to operate their business or even expand to an international
market. Hamed (1995) stated that Bumiputera entrepreneurs employ their personal
networks in many fields of their business. A positive relationship with actors through
their personal networks allow them to have financial assistance, moral support, advice,
business information, resources and services, new contacts, business knowledge and
skills, and access to a new or existing market.
Zain and Ng (2006) illustrated that Malaysian software firms have successfully
internationalized their products to foreign markets within a few years because of
connecting themselves with extensive established networks. Based on their study, the
software firms highly rely on the network relationships in their initial decisions to an
international market, to maintain business sustainability in the global market, and to
get involved in any marketing activities even though the entrepreneurs themselves are
not a marketing expert.
According to historical data, Malaysia and Singapore have established a strong
business network relationship, thence two-way business investment in between two
countries is ordinary. Usually, Malaysian SMEs invest in Singapore that focuses more
on services, rather than in manufacturing industries, whereas Singapore serves as an
export platform and provides capital to the Malaysian firms. Therefore, Malaysia and
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Singapore have become interdependent through network relationships (Yeung 1998).
Many prominent Malaysia Chinese transnational corporations (e.g., Genting, Kuok’s
Group, Hong Leong Malaysia, and Paramount) have remarkable performance in
Singapore through their engagement in complex networks. The leading businessmen
in these complex and intractable networks are Lim Goh Tong, Robert Kuok, Quek
Leng Chan, and Vincent Tan (Yeung 1998).
Omar and Ramlan (2014) mentioned that actors such as customers and suppliers are
not only the network relationships need to develop in business transactions, they also
consist of parties (i.e., government agencies, consultants, banks, business advisors,
business associations, and competitors). They are required to create and maintain
network relationships with various parties in the business environment to have viable
businesses. Network relationship is significant for Malaysian firms including large and
small enterprises. Senik, Isa, Scott-Ladd, and Entrekin (2010) mentioned that networks
relationship play a remarkable role in leading Malaysian entrepreneurs to global
markets. Therefore, more firms have incrementally engaged in international networks.
1.1.5 Existing research studies of Malaysian SMEs internationalization through
networks
Network theory has been existing multiple times in the internationalization research
studies. However, little research is focusing on the Southeast Asia countries. Recently,
the internationalization of SMEs through network relationships is gaining interest
among scholars. Senik et al. (2010) stated that networks and relationship is a crucial
factor to influence SME internationalization. Farinda, Kamarulzaman, Abdullah and
Ahmad (2009) investigate the role of business network as a strong element for the
Malaysian SMEs. Their findings highlighted that it is crucial to know the motives (i.e.,
asymmetry, necessity, reciprocity, stability, efficiency, and legitimacy) for building
business networks to bring successful businesses for SMEs.
Zain and Ng (2006) examined the use of network relationship to facilitate SME
internationalization process. Network relationship has been used to motivate and
trigger entrepreneurs internationalize, influences the decision of market selection,
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mode of foreign entry decision, international pace, and pattern as well as to reduce the
risk and cost.
Senik, Scott-Ladd, Entrekin and Adham (2011) examined the effectiveness of the
networks system in Malaysia. This study intends to identify the roles and sources of
networks that assist SMEs to internationalize. It showed that government institutions,
business associates, and personal relations are the interrelated sources of networks for
SMEs internationalization. Hamed (1995) explained the personal networks are crucial
for Malaysia Bumiputera entrepreneurs in developing their business. He found out
family and friends become essential roles in building networks for Bumiputera
entrepreneurs because of the social culture and relations.
Omar and Ramlan (2014) discovered three critical themes to explain the factors of
participation in clubs or associations for small business entrepreneurs. There are
obtaining intangible resources, strengthening network capability, and fulfilling social
needs.
Although the existing research focused on the network relationship that influences and
facilitates SMEs internationalization in Malaysia. However, a comprehensive model
about the values of networks that lead to Malaysian SME entrepreneurs in international
markets is still limited.
1.2 Research gap and purpose of study
This thesis is related to the research on entrepreneurship, international opportunity and
internationalization within the network. Bruton, Ahlstrom and Obloj (2008)
highlighted that most of the entrepreneurship research is focusing on the North
American and the European contexts. Researchers little know the exploration of
outside these two developed regions. Thus, future study should be conducted in the
emerging regions as the findings from the advanced economies are not applicable to
the entrepreneurs in the emerging economies (Bruton, Ahlstrom & Obloj 2008).
Emerging economies refers to countries which having rapid economic growth with
increasing income and buying power (Senik et al 2011). Sim and Pandian (2003)
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highlighted that limited attention had been given to the relation of SMEs and
internationalization in emerging markets.
From the previous study, the literature from developed countries has repeatedly found
that networks influence on internationalization. However, a question arises whether
network still holds a similar positive impact in the context of small firms that operate
in the Southeast Asian countries (e.g., Malaysia). For this reason, Senik et al. (2010)
call for research that recruits entrepreneurs to understand influential factors that lead
to SMEs internationalization in emerging countries. As refer to Senik et al. (2010)
study, the empirical data was collected from experts (i.e., academics, supporting
government agencies, the Chamber of Commerce, policymakers and research
institutes) which could limit the understanding of internationalization process;
therefore, the more comprehensive of understanding the internationalization process
from the viewpoints of entrepreneurs or practitioners is essential for better
understanding.
As Zain and Ng (2006) research of Malaysian SMEs internationalization was derived
from a single sector; therefore, their findings might be limited to the software industry.
A more empirical study has to be conducted to verify and generalize their results in
other business sectors.
Ortiz-Ospina, Beltekian and Roser (2018) highlighted that trading between emerging
economies is becoming more important than ever. The growth of SMEs in Asia is
considered rapid because of the great business opportunities. Besides, there are
increasing numbers of international firms located in the developing countries are
becoming significant as they contributed to the global economy. Thence, it is
interesting to conduct a comprehensive study in an emerging country. The context of
this study is mainly based on the SMEs in Malaysia, an emerging nation that is based
in Southeast Asia.
Eleven sovereign states exist in Southeast Asia, namely Brunei Darussalam,
Cambodia, East Timor, Indonesia, Laos, Myanmar, Philippines, Thailand, Vietnam,
Singapore, and Malaysia. According to Brent (2018), Singapore is the only country in
Southeast Asia to be considered an advanced economy, whereas Brunei Darussalam,
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Cambodia, Indonesia, Laos, Philippines, Thailand, Vietnam, and Malaysia are
categorized as emerging economies.
Taking consideration into emerging regions that exist in Southeast Asia, Malaysia has
scored the most advanced emerging economies in term of Inclusive Development
Index, healthy life expectancy, and gross domestic product per capita (Brent, 2018).
In time of a 2018 published report of global entrepreneurship index that captures the
extent and depth of the supporting entrepreneurial ecosystem, including opportunity
perception (pillar 1 and 6), networks (pillar 4), internationalization (pillar 13), and
competition (pillar 9), Malaysia is ranked 58 globally with 32.7 scores, slightly behind
ranked 53 Brunei Darussalam with 34.3 scores (Ács, Szerb, & Lloyd 2018). Further,
the literacy rate of Malaysia is relatively high at 93.7 (Worldatlas, 2018) and the
Quacquarelli Symonds (QS) world university rankings 2019 reveals that Universiti
Malaya and Universiti Kebangsaan Malaysia are globally ranked as 87 and 184
respectively (QS, 2018). For these reasons, it is rational to select Malaysia as an
entrepreneurship study phenomenon of the emerging economies.
Although there are several business programs and funding are provided by the
Malaysian government and private institutes to assist SMEs during their early stage
operation, such as Cradle Fund and Malaysian Global Innovation & Creativity Centre.
However, many businesses encountered failure. The reason given is that many SME
entrepreneurs are not able to manage their ongoing companies in the international
market; they are lacked of knowledge, experience, network, and capability to
overcome the unexpected event (Abdullah & Zain 2011). Therefore, networks could
be a successful antidote to solve the problem.
The objective of this thesis is to respond to the following research questions:
1) How do networks affect Malaysian SME entrepreneurs to discover
international opportunities and to operate their business in the international
markets?
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2) During the internationalization, what are the influences of networks on
Malaysian SME entrepreneurs’ knowledge, experience, and future business
ideas?
This thesis serves to enhance reader’s and SME entrepreneurs’ knowledge by
providing a deep understanding on the present SMEs internationalization through the
networks approach.
1.2.1 Significance of the research
This thesis highlights the roles of networks that affect entrepreneurs in discovering
international opportunities and operating their business in interational markets.
Previous research indicated that international business network coordination would
turn into a considerable phenomenon which could offer several benefits (Johanson &
Vahlne 2009). Specifically, this thesis focuses on the method of managing and
coordinating the international relationships. Apart from that, how SMEs is connected
with the current business partners is another interesting point that answered by this
thesis. Besides, this thesis provides differences of actions and commitments of SMEs
entrepreneurs with international networks by comparing with previous findings that
conducted in Western and developed countries. In term of implications, the current
thesis contributes to a more practical-based model of the network that beneficial to all
Malaysian SMEs entrepreneurs. Further, the findings of this thesis could be used by
any Malaysian government institutions in planning and designing their programmes of
enhancing the Malaysian SMEs’ sustainability in internationalization.
1.3 Structure of the thesis
Chapter 1 serves to position the direction of this thesis by demonstrating the research
backgrounds and reasons for conducting the research. Chapter 2 presents a literature
review of Malaysian SMEs internationalization, internationalization theory, and
network theory. Chapter 3 explained the used of methodology and the background of
the selected companies. Chapter 4 presents the data analysis and findings of the study.
Chapter 5 provides a discussion and conclusion with all key results, highlights the
contribution of the study from theoretical and managerial point of view, the limitations
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of this thesis and suggestion for the future research, and assessments the validity and
reliability of the study. The appendices consist of interview questions and list of
companies.
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2 LITERATURE REVIEW
In this chapter, the literature of internationalization, network approach and Malaysian
SMEs internationalization are reviewed to provide a better understanding of earlier
and latest findings, the exact phenomenon, and the theoretical development overtimes.
As the previous chapter has mentioned, scholars highlighted that the network is
considered an essential factor to facilitate firms to go abroad. Therefore, the
coordinating and managing the relationship with actors in networks of SMEs become
more meaningful to know.
2.1 Internationalization
In the last few decades, intensive research has been conducted to explore from different
perspectives of internationalization, including organizational theory, network theory,
international management, strategic management, and marketing. According to the
current literature, scholars have employed different definitions of internationalization
in their research phenomenon. A simplified description of internationalization is a firm
cross-borders (Schweizer, Vahlne & Johanson 2010). Calof and Beamish (1995)
interpreted internationalization is a process of the firm’s participation in international
operations. In the current thesis, internationalization is defined as “outward movement
in an individual firm’s or larger grouping’s international operations” (Welch &
Luostarinen 1988). Another explanation for internationalization is
“Internationalization as the process of adapting the firms’ operations (the strategy,
structure, and resources) to the international environment” ( Johanson & Mattsson
1993; Masum & Fernandez 2008; Senik et al. 2010). In general, internationalization
refers to a firm starting its business from the domestic country and gradually expand
to foreign countries.
Welch and Luostarinen (1993) suggested two types of internationalization: outward
internationalization (e.g., selling products in foreign markets and developing business
alliances in foreign countries) and inward internationalization (e.g., adopting
management skills, new technology, direct investment from foreign countries).
Outward internationalization benefits firms especially in learning new technologies,
the needs of international markets (Francis & Collins-Dodd 2000) and generates a
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positive economic result that due to revenue growth (Kogut 1985). Contrary, inward
internationalization improves the performance of firms by learning or using foreign
technologies, management skills, and gain capital investment (Buckley, Clegg &
Wang 2002).
Johanson and Vahlne (2009) stated that two possible reasons for the firms to have
international expansions: 1) discovery of exciting business opportunities and 2)
influence of the business partners who intended to expand business in the foreign
markets. Other reasons that drive to internationalization include the firms wish to
increase future income, market diversification, and the limit of market expansion in
their home country.
Firms gains several benefits from internationalization. Firstly, firms can achieve cost
efficiencies because of the large volume business and able to utilize economies of scale
(Hout, Porter & Rudden 1982). Next, as the firms operate in a diverse international
environment, they have the opportunity to learn how to satisfy and meet customer
needs from different parts of the world. Such a process would further improve their
competitiveness and ability to compete with different international competitors
(Kostova & Roth 2002). Nonetheless, firms encounter risks and challenges from the
internationalization process, such as unfamiliar with foreign laws and regulations, and
difficulties in communications, languages and cultural differences. Johanson and
Vahlne (2009) argued that such risks and challenges are generally complicated and
hard to prevent when firms extend their business to an unfamiliar place.
Johanson and Vahlne (1977) developed the Uppsala internationalization model that
focuses on the characteristics of the internationalization process of the firms and is
considered as a risk reduction model. It illustrates how firms could gradually increase
their activities in foreign markets. The model showed that Swedish manufacturing
firms usually scale their international operations in small steps. The establishment
chain illustrated firms begin with exporting to a country by agent, then when the time
the sale grew they will have their own sales subsidiaries and followed by established
wholly owned subsidiaries. In other words, firms usually start with little investment
and less risk-taking, they will invest more resources and capital after a period as they
recognize and confirm the potential market. Those firms usually start entering a
20
foreign market which is closer to their home country as it has less psychic distance,
especially in business practice, language, cultural, education, and industrial
development differences. Slowly, they will choose to enter a far distance foreign
market that has a higher level of diversities.
Uppsala model illustrates the internationalization process of firms is driven by their
knowledge (see Figure 1). The knowledge accumulation and learning are the main
elements to influence firms internationalization. Besides, this model has two aspects:
state aspects and change aspects. State aspects included market knowledge. The firms
have knowledge of the foreign market, environment, and operation. It can be taught or
can be learned from personal experience. Besides, firms gradually gain experiential
expertise during their international operations. General knowledge and market-specific
knowledge are needed for firms to perform activities in a particular country. Market
commitment is referred to the firms allocate resources to the foreign market, and it is
measured by two factors: the number of committed resources and the degree of
commitment. Generally, the more the resources invested in a specific foreign market,
the higher the degree of commitment will be assigned to the international market.
As for the change aspects, commitment decisions explain the decision of the firm to
commit resources to the foreign market. The problems and opportunities in a foreign
market are aware by the firms when making decisions. They concern about uncertainty
effect and economic effect on each of the decisions. Besides, current activities describe
as the firms keep repeating their business operation to achieve the desired outcome.
Figure 1. The basic mechanism of internationalization: state and change aspects (Johanson & Vahlne 1977).
21
Sharma and Johanson (1987) studied the internationalization process of technical
consultancy firms from the service industry. As compared to the previous
internationalization process of small manufacturing firms, the risks of service firms in
internationalization are relatively low. The service firms are unlike manufacturing
firms that require massive capital investment and fixed assets. Service firms such as a
professional consulting firm are not needed fixed assets, and the skill possessed by
them can be slightly modified and use in many ways and many countries that based on
clients’ need. In the service industry, the sales and production of the service are
accounted together and no economic basis for sales units or sales agents in abroad.
Thus, the risk avoidance is lower as compared to the manufacturing firms which
required to the assistance of export experts and a local agent from the foreign market.
The consultancy firms are not performing according to the established chain because
it can be established as a local subsidiary only after receiving a task. Further, once the
consultants have completed their mission, the office can be closed quickly and move
to another market. In general, the internationalization process of consulting firms is
not similar to the concept of internationalization that applies to the manufacturing
firms.
In summary, the Uppsala internationalization model shows that knowledge is an
essential element for firms to understand their foreign targeted markets and thus reduce
the adverse risks. They are gradually gaining experiential knowledge during their
overseas operation. Further, the firms increasingly get involved in international by
increasing their level of commitment. However, the traditional Uppsala
internationalization model is not suitable for all industry, an example of the service
industry as given in the above paragraph. It might have a different process in
internationalization. For example, software company IOS, Android, they do not need
any intermediate agents to assist them to enter global markets. Therefore, different
industries supposedly to have different internationalization process.
2.2 Network theory
A network is a model that explains a large number of entities that are connected. In a
competitive environment, it is crucial for business people to have network contacts
that could provide specific support and service to them (Mitchell 1969). Network
22
approach enables business people to have a better understanding of what happens in
the complicated business markets in which they are engaged (Olkkonen, Tikkanen &
Alajoutsijärvi 2000).
Barnir and Smith (2002) stated that social networks are essential for small firms as
they could acquire additional resources and emotional support from actors. Even
though they are small size firm but the present technology development encourages
them to use their networks regularly, especially in the online context, such as email,
social media channels, video conference, text messaging services, Skype and other.
Fuller and Thomas (2004) indicated that each of the alliance is considered as a social
network. The information communication technology (ICT) provides opportunities for
a firm to build a strong network relationship with its long-distance business partners.
As Boudreau, Loch, Robey and Straud (1998) indicated that information technology
makes geographical boundaries no longer considered as a limitation of business
practice and can be easily transcended. Therefore, the coordination and control of firms
could be managed effectively and promptly when dealing with their partners by
utilizing the advanced of technology.
In recent decades, network theory has been highlighted its importance in the marketing
and international business literature. Gilmore, Carson and Rocks (2006) studied the
networks of SMEs owners in connection to their marketing activities within the food
distribution channel context. Indeed, networks would influence marketing activities.
The reason given is that SMEs owners utilize networks to carry out marketing when
the time of multinational companies entered into their local market. They use networks
to discuss, plan and refine marketing activities such as designing marketing activities,
managing product, and promotion decisions and managing product pricing.
2.2.1 Network theory of internationalization
The definitions of internationalization with networks and relationships context have
been formed since the 1990s. Naidu, Cavusgil, Murthy and Sarkar (1997) refer
internationalization as to a firm gradually developing their network of global trade
relations. Johanson and Vahlne (1990) interpreted internationalization as an
accumulated process in which relationships are continuously built, developed,
23
maintained and dissolved for the purpose of meeting the firm’s objectives. A closely
similar explanation from Lehtinen and Penttinen (1999), internationalization means
developing networks of business relationships in foreign countries through extension,
penetration, and integration. Axelsson and Johanson (1992) illustrated networks as
the relationship between the firm’s management team or employees with their
customers, suppliers, government, distributors, bankers, competitors, families, friends,
and others who enable them to expand their business activities into an international
level.
Based on the prior studies in the 1980s, the network model of internationalization was
developed because most of the existing firms have proved to use the network approach
to facilitate their internationalization (Johanson & Mattsson 1988). Johanson and
Vahlne (2009) stressed that business network is the web of connected relationships. In
other words, the markets are networks of interconnected relationships (Johanson &
Mattsson 1988), and the relationships lie in the individual and organizational level
(Solberg & Durrieu 2006).
Firms usually establish, develop, and maintain a long-lasting business relationship
with their business actors (Hakansson 1982; Hallén, Johanson & Seyed Mohamed
1987). Rocks, Gilmore and Carson (2005) suggested that the networks of SMEs owner
or manager are established based on his or her regular interactions and activities which
involving personal networks, business networks, social networks, marketing networks,
and industrial networks.
Etemad, Wright and Dana (2001) stated that the symbiotic relationships with large
firms could assist SMEs to compete in the international markets. The connections
within networks allow firms to gain knowledge about foreign markets, acquire
resources, and reduce entry risks. The foreign market knowledge could provide
opportunities for firms to internationalize and also enable them to create an appropriate
strategy to speed up their internationalization process (Wincent 2005).
Recently, a number of literature has discussed the importance of network in supporting
and facilitating the internationalization process of a firm. Sharma and Johanson (1987)
examined the internationalization of technical consultancy firms. They showed that
24
the network relationships of consulting firms with other consulting firms are crucial.
Consulting will have the chance for internationalization as they gain the foreign market
opportunities through the network actors and recommendations from their business
partners or clients. The relationships can be considered as bridges to abroad when the
consulting firm has a positive feeling with other firms which operate in international
networks.
Johanson and Mattsson (1988) defined internationalization as a firm establishes and
develops the positions in the network relationship to the counterparts who are
operating in foreign countries. Besides, when the firm has the existing position in
abroad, it has the intention to develop position and increase resource commitment.
Johansson and Mattsson (1988) analyzed the different situations of the firm in
internationalization as shown in Figure 2. The early starter shows that
internationalization of the firm usually is encouraged by foreign distributors or
customers. Due to the firm’s insufficient international market knowledge and limited
relationships in abroad and also low opportunity to acquire knowledge from its
domestic market. Therefore, the model suggests that the firm needs to get assistance
from agents. For lonely international, a firm is highly internationalized but the market
environment which is lack of investment from foreign firms. The model argued that
the firm would have abilities to succeed because of their existing knowledge and
experience in international markets. Also, the firm can spread its new product faster
and easier by using their position in the market. The later starter shows that a firm
with low internationalization in the internationalized market environment. The firm
enables to enter the foreign market based on the relationship in a domestic market. The
international among others illustrate a firm with high internationalized and operates
in high internationalize environment. This firm has connections with many global
networks in order to obtain external resources. The model has clearly illustrated the
different conditions of firms in internationalization, and it is useful for them to
understand their current situation and able to allocate their effort on strengthening their
position in a foreign market.
25
Figure 2. Internationalisation and the network model
Coviello and Munro (1995) emphasized the use of network relationships to seek
foreign market opportunities and to perform international marketing activities. The
network relationships are perceived as an increase in firms’ international competitive
position, accesses to local market knowledge, and obtains initial credibility as well as
reduces the entry costs and risks. For young internationalization firms, their existing
networks are advanced for their firms’ current growth and even accounts for their
future growth. The mature firms’ highlight networks relationships have increased their
firms’ market development activities. However, restrictions would be embedded in
them especially in seeking specific marketing opportunities and building relationships
with others. Therefore, firms develop new products for markets diversification or
establish in-house marketing and service to reduce the marketing activities that
controlled by significant players (Coviello & Munro 1995). The heavy relied on the
network partner while entering an international market and also develop market is
beneficial for a firm in the early stage. However, limitations may occur in the later
stage. The firm needs to find solutions to reduce their reliance with the dominant
partners. Therefore, networks could be seen as useful in certain conditions.
Small manufacturing firms perceived cooperation within networks could bring
valuable benefits, and it is a cost-effective way to improve their business
performances. The group or association joined by SMEs will offer services such as
seminars, exhibitions, and training. For example, firms have the opportunity to listen
to professional speakers in their field and discuss the current topic in the business
world during the seminar. Small manufacturing firms use networks to improve their
business operation ability and ultimately to be more efficient and profitable. The main
advantages of participating in networks are that it could establish personal contacts
and have chances to meet people more regularly. Besides, they can gain the latest news
26
and information to ensure their businesses are at the forefront of the current
phenomenon (Fuller-Love & Thomas 2004).
In the business environment, the network relationships of entrepreneurs with partners
have impacted their firms’ performance, including network relationships with business
chambers. Omar and Ramlan (2014) illustrated three critical factors for the reason of
SMEs joining in business chambers: 1) improving network capability 2) acquiring
intangible resources, such as understand the current business environment that they
need to be aware of, acquire knowledge and gain benefits from training and seminar
3) fulfilling social needs, includes getting to know others with creating new
relationships.
From the literature, networks are not only focusing on the network relationships
between firms, but also the firms participating in the group, association, or club. Firms
might receive advantages if the person who joins the group or club that have strong
authority. However, some group or club failed to perform their roles due to a lack of
discipline and responsibility. They are recommended to improve their roles and
attentive to support and to facilitate their SME members. Thus, joining the group or
club is an optional network method.
Senik et al. (2011) explained sources and roles of networks for Malaysia SMEs
internationalization. The sources of networks are interconnected between personal
relations, business associates, and government institutions. The unity among networks
sources and agencies are essential to achieving internationalization as solely depends
on either one source is not sufficient. Networks enable firms to gain knowledge about
foreign institutions (e.g., current rules and regulations) so that they will alert when
entering the foreign market. The government institutions such as ministries and
agencies play the crucial role in assisting and supporting SMEs to international
markets. Therefore, they strongly recommend SMEs to utilize the resources as
provided by government institutions.
27
2.2.2 The business network of internationalization process model (revisited)
Despite the Uppsala model is popular, the model faces a lot of criticisms and
limitations. Abdullah and Zain (2011) criticized the Uppsala model might not apply to
explain the present rapid internationalization of SMEs because the world economy is
integrated with the advanced of technology and reduction of trade barriers among
countries. Thus, more firms intend to go international when they started their business.
Besides, Johanson and Vahlne (2009) highlighted that their Uppsala model needs to
be revised because of the numerous studies on the network perspective on the firms’
internationalization. For instances, the network relationship could influence on the
selection of foreign markets and mode of entry (Coviello & Munro 1995), the long-
lasting relationships in between suppliers and customers within country or other
countries are crucial (Hallén 1986), firms consistently participate in a set of different,
close and long-lasting relationships with their important suppliers and customers
(Hånkansson 1989). Saleh and Ndubisi (2006) recommended that the Malaysian SMEs
should develop business networks and strategic alliances to gain competitive
advantage and to achieve the successful business. All these findings provide strong
evidence that networks are essential to firms’ internationalization.
For these reasons, the Uppsala model was revisited by adding business network view
and entrepreneurship theory (Forsgren 2016). This model considered a proper method
by analyzing the firms’ internationalization behavior. Further, this revised model
provides insights into opportunity development and relationship development
processes. Besides, it uses to cope with the changing of the business practices and
business environments. From the business network view, firms can learn and gain
knowledge from other actors in the network relationships. In contrast, the original
model only represents the knowledge gained through experience when operating
abroad. Apart from that, knowledge is a considerable component for firms to go
international.
Johanson and Vahlne (2003) stated that internationalization is more on strengthening
a firm’s network position rather than claim as overcoming traditional entry barriers. In
the latest revised model as shown in Figure 3: The business network model of the
internationalization process, the state aspects including knowledge opportunities and
28
network position. They considered opportunities as the key element of the body of
knowledge that drives to the internationalization process. Opportunity recognition is
viewed as a discovery of the hitherto unknown and the entrepreneurs are alert of and
be ready for the surprise. In contrast, Kizner’s view that it is accidentally rather than
an outcome of opportunity seeking activities (Forsgren 2016). Other vital components
of knowledge consist of needs, strategies, capabilities, and networks which are related
to the firm. For the network position element, they assumed a firm goes
internationalization through a network. As the relationships with different parties
within the network are distributed unequally (e.g., level of knowledge, trust, and
commitment). Therefore, they might be different in promoting successful
internationalization. The firm will enjoy a partnership if the process could be beneficial
to them. Such effect is extended to the network of the particular partnership, which
means that if someone or a firm is doing great within their network, such positive
outcome would be reflected other actors that exist in the same network (Johanson and
Mattsson 1992).
Figure 3. The business network internationalization process model (the 2009 version)
Apart from that, the revised model includes other changes such as adding relationship
commitment decisions element, which shows that a firm will make the decision either
increase or decrease the extent of commitment with the relationships in its existing
network. There are two types of decision for the commitment to the relationship: 1)
build a new relationship 2) protect and support the current network relationships. In
other words, the decisions drive the process whether establish and continue growing
the network relationship or terminate the network relationship.
29
As refer to Figure 3, learning, creating, and trust building is another important element
which illustrates the current knowledge, trust, and commitment that would affect the
processes of for gaining knowledge, and forming the trust among actors in the network.
Vahlne and Johanson (2013) stated that learning and creating have a tight relationship.
Trust is known as a prerequisite of learning (Granovetter 1985) and commitment
(Vahlne & Johanson 2013). In general, the existing business relationship allows a firm
to identify and to develop the opportunity. Besides, internationalization is contingent
that developing opportunities rather than overcoming uncertainties. The revised model
has included trust (i.e., affective dimension) as an essential element to understanding
such relationship.
A few years later, the Uppsala revisited model continue to use on the evolution of the
multinational business enterprise (MBE). The outcomes of the study create several
essential elements. Vahlne and Johanson (2013) proposed a model which is
specifically designed for explaining the evolution of multinational business enterprise
by using the Uppsala model version 2009 and including the explanation of dynamic
capabilities theory, a theory of management of uncertainty, and theory of
entrepreneurship (see Figure 4).
Figure 4. The Uppsala model of MBA evolution (Vahlne & Johanson 2013)
This model highlighted that whatever new knowledge gained during the
internationalization process would have an influence on the subsequent learning
process as well as the firm’s commitment decision. There are two essential updated of
30
this model as compared to the Uppsala model (Johanson & Vahlne 2009): 1) This
model proposed considering the firms’ commitment of party, project or strategy 2) The
learning, creating, and trust-building elements should be focused on the inter-
organizational processes.
Vahlne and Johanson (2013) stated that inter-organisational is a critical element in this
model. Further, the creation process is crucial as it is able to create new relationship
structures and new knowledge in the evolution process of the MBE (Dosi & Marengo
2007). Dunning and Lundan (2008) highlighted that the rapid and complicated
environment changes in present and future would lead to uncertainty. At the same time,
Vahlne and Johanson (2013) advocated that uncertainties are related to management,
but such consideration is often underestimated. In other words, the management
usually omits risks and uncertainty. For this reason, Vahlne and Johanson (2013)
tailored the Uppsala model by considering the uncertainty to resolve such issues.
Forsgren (2016) argues that the need to pay more attention to the outcomes while
including business network and entrepreneurship theories into the revisited Uppsala
model. Therefore, he conducted a critical examination of the revisited Uppsala model
by focusing on the consequences. The structural and relational aspects in which firm
embeddedness can be used to enhance the understanding of the internationalization
process and the role of liability of outsidership. An open network may reduce the
firms’ liability of outsidership and has the capability to discover business
opportunities. The internationalization process can be shaped by the decision making
of the entrepreneur and business network of a firm. Numerous questions have been
listed for more research regarding business network theory with the Uppsala model,
and the entrepreneurship and Uppsala model:
1) How can the firm strike a balance between networks that reduce the liability of
outsidership in the opportunity discovery phase of the internationalization process,
and networks that reduce it in the opportunity development phase?
2) If entrepreneurship is fully integrated into the Uppsala model, how relevant is
incremental behavior, manifested in the speed and direction of internationalization?
31
As for the current thesis, the framework of the business network internationalization
process (the 2009 version) will be adopted as this model emphasizes a proper process
of SMEs internationalization that integrates business network theory and
entrepreneurship. Thus, we could assume that it is the most suitable model in the
Malaysian SMEs internationalization context.
2.2.3 Guanxi—Social network
In Asian countries, especially in China, Hong Kong, Taiwan, Malaysia, and Singapore,
the ethnic Chinese firms tend to foster personal relationships in their businesses that
known as Guanxi. “Guanxi is built through family ties, personal connection of the
owners, including connection with selected government-owned companies, trust, and
cooperative strategies” (Sim & Pandian 2003). Fan (2000) advocated that guanxi is
conceptualized distinct to networks although both concepts share some similar
features.
Guanxi is a Chinese word which means connections or relationships between
individuals and it is a general term for social networking (Yeung & Tung 1996). It is
a Chinese culture value that affects business operation, especially in China. Guanxi
refers to two individuals have a reciprocal exchange for a purpose (Fan 2002).
Specifically, the connection is established in between two individuals who have the
mutual flow of social or personal transactions. The practice of guanxi of Confucian
philosophy has been existing and universal in Chinese business society for more than
2000 years (Wiegel & Bamford 2015).
In reality, guanxi sort into three categories: family, helper, and business guanxi (Fan
2002). Since the current thesis is focusing on the Malaysian SMEs, the following
discussions would be centered on business guanxi. Businessman sometimes uses
guanxi to look for the solution. Besides, guanxi refers to individuals would receive
favorable treatment in an exchange of easy to access limited resources, enhance access
to controllability information, credits grants, and other privileges (Lee, Pae & Wong
2001). Chinese believes that guanxi could be a critical factor for operating business as
it enables entrepreneurs or firms to utilize social capital for the establishment and
sustainability of their business.
32
The pursuit of advancement and survival of an organization have triggered the
relationship between SMEs and guanxi emerges. Guanxi is considered a personal
asset. For instances, an employee can use guanxi to gain benefits to his/her employer,
but it is relatively impossible to be a company asset, as once he/she left the firm, the
firm would never receive the similar ”special treatment.”(Tsang 1998; Fan 2002).
The recent networks literature more concerned about the western business context.
However, history proposes that the network is somehow related to guanxi, which has
been the main form for China’s transactional governance since a long time ago before
the notion was adopted by the Western theorists (Davies, Leung, Luk & Wong 1995).
Guanxi is more connected to personal instead of corporate. The exchanges between
the actors of guanxi can be commercial and also social (e.g., the exchange of
preferences and giving of face or social status).
There is different business practices between the Chinese and Western culture,
especially in the personal relationship. Guanxi is essential for the Chineses business
community and politics and society. It is hard to complete a business task without
having guanxi in Chinese culture. If an outsider who wish to transform to an insider,
he/she has to show his/her sincerity by giving small gifts, hosting a dinner and giving
personal attention (Davies, et al. 1995). Besides, guanxi is a dynamic process which
starting with two individuals and may involve more individuals at later stage until to
get the thing done. Guanxi brings numerous benefits: 1) It can make the routine
business operation smoothly, particular in the collection of payment and transport
arrangements. 2) It can establish and enhance a company image and reputation. 3) It
allows a person accesses to the broader network of connections through single guanxi
with someone who has high influential.
Besides, the actors of a guanxi network are a vital source of information for a firm to
understand the current market trends, business opportunities, and gather information
related to government policies (e.g., import regulations and restrictions). Guanxi
enables members to short-cutting the bureaucratic maze for accessing to tangible
resources such as raw materials and authority of resources (e.g., authorization process
of the local and central government) (Davies et al. 1995).
33
Yeung and Tung (1996) recognized that guanxi is a crucial success factor to operate a
business in China. The strong building guanxi with the right person is critical to
achieving long-term business success. Usually, small size and inexperience firms tend
to utilize more on the privileges of guanxi than that large size and high experience
firms. Although guanxi is essential, it needs to work with other factors while
performing business. Fan (2002) argued that a business strategy that heavily relies on
guanxi is considered risky and naive. Wiegel and Bamford (2015) stated that merely
depends on guanxi would not ensure a firm’s long-term success and sustainability.
Fan (2002) stated that guanxi is more on personal, and it cannot claims as a source of
competitive advantage as it will become worthless or even a liability if a party loses
their power especially in between a businessperson with a government official. Thus,
guanxi is considered a tactical but temporary tool. Apart from that, the role of guanxi
in business is gradually decreasing as China, which the Chinese governments and
corporations are moving to an open market system.
The existing literature has criticized the use of guanxi in business operation by
overstating its benefits that lack proven evidence. The evidence to convince guanxi is
favorable to business performance is insufficient (Fan 2002). Recent literature opposes
the benefits of guanxi by perceiving it brings numerous disadvantages. The effort of
developing and maintaining guanxi is time-consuming and usually incurring high costs
(Fock & Woo, 1998; Yi & Ellis, 2000). When a firm heavily depends on guanxi, it
will consume more financial and managerial resources to nurture and maintain guanxi
network. Eventually, it will face high expenses and risks over than the benefits that
obtain from guanxi.
Apart from that, guanxi is related to corruption and crimes. As in China, guanxi
between business and government is connected to unfair competition, bribery, and
fraud. Therefore, this kind of guanxi is inherently corrupt and questionable in term of
ethics and morality (Fan 2002).
As opposed to previous literature, Wiegel and Bamford (2015) using the resource-
based view to analyze the role of guanxi within buyer and supplier relationships. They
considered guanxi as the organizational resource especially in achieving an
34
organization goal or look for a business solution. Therefore, it is a source of
competitive advantage which similar to the previous literature that views guanxi in the
Asian Chinese ethnic firms to broader competitive advantage (Hamilton 1991). The
contribution of guanxi from employees not only increase their personal value but also
increase the company value. The costs of guanxi such as time, individual effort, and
money are perceived as investment resources for maintaining and securing profitable
relationships.
Based on the literature, guanxi could be viewed as playing an essential role in the
Chinese market, especially in China. It is hard for businesses to operate well if without
guanxi. For the Western companies that wish to invest and conduct business in China,
they have to consider in building guanxi with others especially in the initial stage: such
as setting up operation and business or agreement negotiation. After a period of
operating the business, they can reduce relying on guanxi by focusing more on
enhancing product quality, services or marketing strategy to ensure long-term business
success. The debate on guanxi is more on the organizational resource, or personal asset
has existing. For the perspective of this thesis, guanxi is more on personal assets rather
than the organization. It is a mobile asset mainly when an employee left the company,
and guanxi will be gone as well. Thus, that company will lose the critical guanxi
connection.
In summary, the existing literature illustrated the networks of internationalization and
also relate networks with the firm’s marketing aspect during internationalization.
Network relationships have triggered the flow of the knowledge of business
opportunities and motivate firms to have an intention for entering the international
markets (Sharma & Johanson, 1987; Coviello & Munro 1995; Wincent 2005).
Andersen and Buvik (2002) stated that networks allow a firm to receive international
opportunities and learning new knowledge during the conversation. Therefore,
networks and learning model are correlated, the actors could exchange their ideas and
acquire new knowledge from each other.
35
2.3 Malaysian SMEs internationalization
The research of SMEs internationalization is getting popular because it plays
significant roles in the development of the national economy. Omar, Arokiasamy, and
Ismail (2009) stated that Malaysian SMEs has contributed to employment
opportunities, increase competition, instigate improvement, and assist large firms’
operation. The trend of SMEs internationalization became more idealize while the
Malaysian government has facilitated in building the linkage between SMEs with well-
established government-owned companies (Ninth Malaysian Plan 2006). Since 2006,
numerous government agencies have been formed to support the process of SMEs
internationalization. Due to this reason, limited research has been conducted in relation
to Malaysian SMEs internationalization before 2006 (Anuar 2018; Senik, Isa, Sham &
Ayob 2014), with the exception of Zain and Ng (2006).
Abdullah and Zain (2011) mentioned that the development in information and
communication technology and reduction in trade barriers and tariffs had increased
opportunities of SMEs to extend their business abroad. In Malaysia, the National SME
Development Council (NSDC) introduced the definition of SME on 9th June 2005. As
for many developments in the economy since 2005 (i.e., structural changes, price
inflation and the transformation of business trends), the definition has been revised on
11th July 2013 (see Figure 5) (Development Finance and Enterprise Department
2013). The meaning of Malaysian SMEs underlines the number of full-time
employees and annual revenue. Malaysian SMEs are divided into two groups: 1)
manufacturing 2) services and other sectors. Further, they are classified into three
levels: micro, small, and medium firms.
The selected firms of this thesis consist of one company of manufacturing sector with
small-scale size, three companies of service sector with small-scale size, and one
company of service sector with medium-scale size. Figure 5 presents the classification
of Malaysian SMEs. As for manufacturing sector, the annual revenue of a medium-
scale SMEs is between MYR15 million (€3.14 million) to MYR50 million (€10.48
million), with seventy-five to two hundred employees. The annual revenue of a small-
scale SMEs is between MYR300,000 (€62,893) to MYR15 million (€3.14 million),
with five to seventy-five employees. The annual revenue of a micro-scale SMEs is
36
below MYR300,000 (€62,893) with less than five employees. As for services and
other sectors, the annual revenue of a medium-scale SMEs is between MYR3 million
(€628,930) to MYR20 million (€4.19 million), with thirty to seventy-five employees.
The annual revenue of a small-scale SMEs is between MYR300,000 (€62,893) to
MYR3 million (€628,930), with five to thirty employees. The annual revenue of a
micro-scale SMEs is below MYR300,000 (€62,893) with less than five employees.
Figure 5. The defintion of Malaysian SMEs (SMECorp 2018)
2.3.1 Theories of Malaysian SMEs internationalization
Senik et al. (2010) investigated the factors for Malaysian SMEs internationalization
by using two phases: the Delphi technique and the average percentage of the experts’
opinions (APEO). The results of the Delphi technique show that the most influential
factor that leads to the Malaysian SMEs internationalization is motivational, followed
by firm, industrial, external, and networks. Interestingly, the motivational factors
become least influential whereas the networks is ranked the most influential factors
while using APEO method (see Figure 6).
37
Figure 6. The model of influential factors affecting SME internationalization (Senik et al. 2010)
The reason given is that APEO method is more accurate than the frequency of the
items mentioned by the panels (i.e., Delphi technique) as it captures the factors by
considering the average responses, in which providing a percentage of each influential
factor by dividing the items mentioned with the number of categories of each
influential factor. In general, the model reveals that most of the Malaysian SMEs rely
on networks while expanding their business to a foreign market, a similar finding as
found in Romania (Musteen, Francis & Datta 2010). As in this model, networks refer
to the support from government agencies, personal contacts such as friends,
colleagues, and family, and the connection with other business associates. Senik et al.
(2010) further explain that the identified five influential factors are interrelated, which
correlated to each other, rather than describing a process model. One limitation of this
model is that the study did not recruit business owners or entrepreneur, and yet,
academician, policymakers, government agencies, Chamber of Commerce, and
research institutes were approached. As a result, this model might not reflect the real
internationalization process as experienced by the Malaysian SMEs.
Nevertheless, the main findings of Senik et al. (2010) are in line with most of the
previous studies that highlighted the importance of networks in internationalization
among the Malaysian SMEs (Mahajar & Carraher 2006; Zizah et al. 2010). Similarly
in most of the Asian countries that dominated by Chinese businessman, such as
38
Taiwan, Hong Kong, China, Singapore, and Malaysia, networks that due to personal
contact has played an essential role in daily business cooperation, business
opportunity, and business expansion (Sim & Pandian 2003; Li & Matlay 2006).
Further, Zain and Ng (2006) found that networks also assist the Malaysian SMEs to
reduce their business risk, to gain foreign market knowledge, to increase credibility,
to lower their business cost, to secure future business revenue, to penetrate a
competitive international market, and to establish a close business relationship with
government-related companies and other channels. For these reasons, Senik et al.
(2011) explored the sources and functions of networks that exist in the context of the
Malaysian SMEs as shown in Figure 7.
Figure 7. SMEs networking linkages and functions in internationalization process in Malaysia (Senik et al.
2011)
Senik et al. (2011) found that the three primary sources of SMEs networking
internationalization are institutions, business associates, and personal relations. In this
regards, the institutions refers to the Malaysian Ministries (e.g., Ministry of
International Trade and Industry and Ministry of Entrepreneurship and Cooperation
Development), government agencies (e.g., The Council of Trust for Indigenous
Citizen, Malaysian Industrial Development Authority, Malaysia External Trade
Development Corporation), small medium industry supporting bodies (e.g., Small and
Medium Industries Development Corporation, Malaysian Industrial Development
Finance, Malaysian Industrial Estate Limited), and free trade agreement program (e.g.,
industrial linkages programs, government to business program).
39
The mains functions of institutions include facilitating SMEs in internationalizing
process, organizing international exhibitions, enhancing networks within and outside
Malaysia, provides advice on foreign entry modes and support agencies, and offer free
education concerning internationalization issues in other countries. The business
associates consist of both multinational corporations and SMEs owners, and the
primary function is to collaborate, develop, and maintain the business relationship,
such as linking with global supply chains and become a supplier to the multinational
corporations or its subsidiaries. The personal relations refer to an individual connection
that formed through business operations, friends, relatives, colleagues, exhibitions,
seminars, conferences, and associations, and such source leads typically to an ease
process of internationalization. Ultimately, these three sources set a network linkage
that allows the Malaysian SMEs to be benefited from accessing internationalization
information and opportunities (Senik et al. 2011).
It is vital for SMEs entrepreneurs of emerging economy to know the present sources
and functions of networks that highlighted by Senik et al. (2011). The reason given is
that they could refer to when they need it and how to process in internationalization.
They will know where to go for acquiring resources, information, and who are the one
should connect and create the business relationship.
Abdullah and Zain (2011) explored practical issues of the Malaysian SMEs
internationalization, such as the use of the mode of entry, reasons for
internationalization, and reasons lie behind of no intention of internationalization
among the Malaysian SMEs. The findings showed that the increased business
profitability and financial success of SMEs is the critical reason for entering an
international market, this is because the Malaysia market is considered small to
generate higher revenue. Other reasons include the availability of market opportunity,
level of entrepreneurs’ motivation, business expansion and demand of their product
opportunities. As the resources of SMEs are small and insufficient, thus, export is the
most popular mode for them to enter foreign markets. Other familiar entry modes
include licensing and franchising. Besides, the obstacles and uncertainties during
operating abroad are the primary challenge for internationalization, followed by lack
of experience, difficult to get new network and potential customers. Apart from that,
40
the theories of the Uppsala model and network approach are the most common use to
explain the context of SMEs in Malaysia.
Recently, Anuar (2018) developed a comprehensive internationalization model that is
underlying the learning process of the Malaysian SMEs (see Figure 8). The author
argued that prior knowledge serves as the most critical element for SMEs
internationalization. As a result, she urged the Malaysian SMEs to recruit personnel
with relevant experience, especially who are equipped with inward and outward
experiences. Remarkebly, Anuar (2018) found that a close interaction process with
foreign suppliers would ultimately lead to a higher level of foreign market knowledge
and chances of internationalization. That is, a personal network with vital foreign
suppliers would lead to forming trust and facilitating a new understanding of
internationalization and the latest technology. To conclude, previous findings have
emphasized the importance of networks concerning the Malaysian SMEs
internationalization (Abdullah & Zain, 2011; Anuar 2018; Senik et al. 2010; Senik et
al. 2011; Zain & Ng 2006).
Figure 8. Learning processes of Malaysian SMEs associated with international sourcing, export, and
connections between inward and outward internationalization (Anuar 2018)
41
3 RESEARCH METHODOLOGY
This chapter discusses the research methodology that used to examine the phenomenon
of networks in the SMEs internationalization. The methods (i.e., research strategy,
approach, empirical data collection, and analysis) adopted in this thesis are based on
the research questions and problems, and detail of explanation will be illustrated. This
thesis presents the background of companies at the end of this chapter for a better
understanding of the selected Malaysian SMEs used in this study.
3.1 Method
This thesis aims to investigate and to provide a deep understanding of the phenomenon
of networks approach in the context of Malaysian SMEs internationalization. Since the
SMEs internationalization process is considered complicated, the opinions from
practitioners are crucial for gaining comprehensive viewpoints of networks in the
internationalization. For this reason, qualitative research is adopted as it could explain
the phenomena (Leavy 1994) and provide a better understanding of the research
context than using quantitative measurement (Gordon & Langmaid 1988). Further,
qualitative research is relatively relevant in investigating the research on networks
activities of SMEs (Gilmore, Carson & Grant 2001).
Apart from the reasons as mentioned earlier, qualitative research is considered the
most advantages way of understanding the SMEs entrepreneurs’ motivations, reasons,
experiences, and actions in the context (Myers 2013), which are not applicable to the
quantitative method. The beauty of qualitative research is that it provides insight into
the decisions and actions of SME entrepreneurs (Myers 2013). It enables the research
to obtain a comprehensive understanding of the interviewees’ thoughts, as well as their
experiences with actions in the context to a large extent. Thus, more meaningful and
concrete findings could be derived from this method. Therefore, qualitative research
is appropriate used to answer the two research questions of this thesis:
1) How do networks affect Malaysian SME entrepreneurs to discover
international opportunities and to operate their business in the international
markets?
42
2) During the internationalization, what are the influences of networks on
Malaysian SME entrepreneurs’ knowledge, experience, and future business
ideas?
The research approach applied in this study is considered an inductive approach. It is
a bottom-up approach which starts with observations, and the theory will be proposed
at the end of the research process (Goddard & Melville 2004). The objective of this
study is to build a new conceptual framework from the empirical data set within the
context of networks of internationalization. The developed conceptual framework will
be used to complement current research theory. A similarity to the statement as stated
by Patton (2002), the inductive approach is suitable for a research problem that is not
completely defined clearly and is not precisely explained by the existing models. As a
result, it provides the chance to discover unexpected things. The inductive approach
enables this thesis to understand the meaning of the Malaysian SMEs activities instead
of explaining the causal relationship through a set of hypotheses.
Earlier researches on the SMEs internationalization through networks approach in
emerging countries is understudied and making clear the scientific research gap exists.
Also, the question about whether networks could affect SMEs in Southeast Asian
emerging nations, and whether the management and coordination of networks would
become an important phenomenon. Therefore, this thesis aims to fill the research gaps
as mentioned in Chapter 1 by using the existing theoretical framework as a reference
to study the research goals and to achieve relevant qualitative data. This study observed
and analyzed how do networks affect SME entrepreneurs internationalization.
Specifically, this thesis explains how do networks affect SME entrepreneurs to
discover international opportunities and operate in the foreign markets and how they
manage, and maintain network relationship with business partners.
3.2 Data collection and Analysis Method
Interview will be conducted to collect the data. The interview data is considered as the
primary data. Myers (2013) stressed that primary data is the data gathered by a person
and it is unique to the research study. This study will be based on the outcomes of the
interviews from the Malaysian SME entrepreneurs in the different industry. It is
43
appropriate to conduct interviews to answer a question that consists of what, why, how
and when.
The interview is one of the qualitative data sources used to record what the
interviewees said for a topic and liable to know the people and their thinking and
thoughts (Myers 2013). Semi-structured interviews were carried out to enable
interviewees to have the opportunity to add valuable insight during the conversation.
Some of the predetermined set of open questions were used, and new questions may
arise during the conversation (Myers 2013). Apart from that, the interview
conversations were recorded, and notes have been taken during the discussion to avoid
missing important points for the next section of the analysis.
Five interviews were conducted to explore the phenomenon of the Malaysian SMEs
internationalization. The first and second interviewee was the same person Mr Tey, he
is an entrepreneur and founder of Company A1 and owner of Company A2. For
company B, the owner is Mr Lim. Mr Kevi is an owner of Company C, and Mr Chew
is a sales managers of Company D. The length of each interview was approximately
one hour, and the interviewees are from different backgrounds and positions. However,
they utilized export and franchise entry mode to expand their business into foreign
markets.
Basit (2003) stated that electronic coding enables the research analysis process
smoothly. As compared to the manual data coding (i.e., cut and paste the pieces of
text) the electronic data coding is much quicker, accurate, and allows more codes to
be derived (Buchanan & Jones 2010). Hilal and Alabri (2013) stated that electronic
data coding are increasingly used by the researcher to ensure rigor in data analysis.
Thus, Nvivo 11 was used in this research to facilitate the analysis of interview
transcripts. It is an electronic method that uses to code the entire interviews data, and
it makes the research process more efficient and accurate. Hilal and Alabri (2013)
revealed that Nvivo is created by QSR International which can enhance the quality of
qualitative research. Besides, Nvivo is capable of coding large and unstructured
qualitative data (Anuar 2018). It enables the researcher to manage, shape, and analyze
the qualitative data (Creswell 2012). Correctly, it could filter irrelevant data and leads
researchers to pay attention to the most functional categories. Also, Nvivo increase
44
researchers’ confidence in making decisions for the categories as it is clear and
unambiguous.
Despite the fact that qualitative research is often used for conducting a study, many
critiques exist by claiming that this method is lack of rigorousness. Therefore, to
ensure the quality of the analysis, the Gioia methodology has adopted in this study.
Gioia, Corley and Hamilton (2013) argued that Gioia methodology is a systematic
inductive approach to new concept development and to enhance the rigorousness of
qualitative research. This methodology consists of three consecutive phases that ensure
the qualitative research with rigor and meticulousness (Gioia, Corley & Hamilton
2013). The study started from organizes the data from the interviews and find the
similarities and differences of quotations from interviewees by making the number of
categories into a manageable sequence.
Further, the categories will be labeled or shortly described (i.e., first order concepts).
Subsequently, the theoretical realm is developed in the second order themes that are
related to the research questions and topic. It describes and explains the phenomenon
of the study which is observing. The aggregate dimensions are established based on
the second order themes, and it moves to broader categories with grouping similar
ideas or thoughts.
All the information from the interviewees were filtered, and only the relevant data was
selected. Once the study has first-order concepts, second order themes and aggregate
dimensions are derived, then it leads to building a data structure. Pratt (2008) stated
that data structure is a significant component to indicate rigor in qualitative research.
The reason given is that it enables researchers to configure their data quickly and
present the process from original data to themes and dimensions during the analysis.
3.3 The background of firms
In this thesis, the selected five companies had met the following criteria of the
Malaysian SMEs 1) the annual sales turnover are between MYR300,000 to MYR20
million 2) The firms have entered at least one international market. The sub-section
illustrates a short background and explanation of each firm in term of the historical
45
establishment, product, firm size, financial performance, and the companies’
internationalization process.
3.3.1 Company A
Company A consists of two subsidiaries as presented in below:
Company A1
The company established in 2015 and specialized in the instant beverage. The products
include white coffee, lemon tea, milk tea, hot chocolate, and soya collagen. The
company has three full-time employees and average annual revenue of MYR600,000.
In 2016, the company started exporting to the Chinese market through local agents.
The company plans to enter Vietnam, Indonesia, and Cambodia in the coming year.
The company began an international market because they do not want to focus on the
domestic market. The company aims to go to several global markets. The interviewee
is Mr. Tey, who is the entrepreneur and founder of the company.
Company A2
The company incorporated in 2013. Company A2 is a restaurant that specializes in the
German cuisines. It has a good reputation in term of its services, ambient environment,
and tasty foods. The company has fifteen employees with average annual sales revenue
of MYR1,200,000. Recently, it has entered the Vietnam market by franchising. The
purpose to enter the international market because the owner has a network with the
local Vietnamese. The interviewee is Mr. Tey, who is the owner of the company.
3.3.2 Company B
The company started incorporation in 2010, which specialize in bird’s nest cultivation
and commercialization. It is a traditional luxury and expensive food product due to
rare and hard to find in the Asia countries. The price is approximately €2.6 to €3 per
gram depending on its grade. For information, it is a common anti-aging supplement
that consumed by the Chinese celebrity to maintain their youthful appearances. In
46
general, the Chinese believe that bird’s nest could enhance immunity system, reduce
body heat, anti-aging, and nourish their skin. Recently, the company focuses on two
main products: pure bird’s nest and concentrated bird’s nest. The company has six full-
time employees with average annual revenue of MYR300,000. As the Malaysian
market is limited, the company started exporting their products to China and Taiwan
in 2016 through the owner’s network that built during his university study. Recently,
it exports products through local agents to ease the international process and reduce
uncertainty risks. The interviewee is Mr. Lim who is the owner of the company.
3.3.3 Company C
The company established in 2011 and specialized in designing and printing. The list
of products and services include: 1) bunting 2) banner 3) poster 4) name card 5)
company product catalog 6) brochure and flyers 7) sticker 8) pass card, staff ID card
and membership card 9) packaging and 10) printing of letterhead, invoice, payment
voucher of the company. At the moment, the company has five full-time employees
with average annual revenue of MYR400,000. The reasons for internationalization
include enhancing the company’s reputation, expanding its customer networks, and
increasing the awareness of the company. The company started entering the
Singaporean and Japanese markets in 2012 through the connection of existing business
in Malaysia. The interviewee is Mr. Kevi, who is the business owner of the company.
3.3.4 Company D
The company establishment in 1999 and it belonged to heavy industry. The founder
has extensive experience and specializes in selling hardware to the automotive and air-
conditioning industry. There are five products categories: metal stamping/press
machine, used/recondition machine, press line equipment, metal components, and
spare parts. It is a reputable company in Malaysia as it has business relationships with
several well-known automobile companies (e.g., Proton and Perodua) and air-
conditioning companies (e.g., Daikin, Hitachi, and Panasonic). In 2012-2013, the
company started entering foreign markets, such as India, Indonesia, Cambodia, China,
and Vietnam. There are approximately fifty full-time employees with average annual
revenue of MYR10 million. The interviewee is Mr. Chew, who is the sales manager.
47
Figure 9. Background of selected companies
Company A1 Company A2
Person in charge Mr. Tey Mr. Tey Mr. Lim Mr. Kevi Mr. Chew
PositionEntreprener and
founderOwner Owner Owner Sales Manager
Industry
Instant beverage
(coffee, lemon tea,
milk tea, chocolate,
soya collagen)
German Restaurant Bird Nest's supplierDesign and printing
servicesHardware trading
Number of full-time
employees3 15 6 5 Approximately 50
Annual Sales
RevenueMYR 600,000 MYR 1.2 million MYR 300,000 MYR 400,000 MYR 10 million
Year of the
establishment2016 2013 2010 2011 1999
Year of entering
foreign markets2016 2018 2016 2012 2012-2013
List of foregin
marketsChina Vietnam China and Taiwan Singapore and Japan
India, Indonesia,
Cambodia, China,
and Taiwan
Company A
Description Company B Company C Company D
48
4 FINDINGS
Based on the empirical data collected from five interviews, this thesis identifies five
aggregate dimensions through variety themes: 1) Opportunities in international
markets 2) Operation of international markets 3) Knowledge and experiences 4)
Network relationhsips 5) The future of international markets.
First Order Concepts Second Order Themes Aggregate Dimensions• To increase campanies’ awareness and recognition regarding their provided products and
services
• To expand and strenghthen companies’ business, sales, networks, and to get more
international counterparts or clients.
• To ensure the sustainability and survival of their companies since there is a low demand of
their products in Malaysia
• Bird’s nest is preceived as a healthy supplement among the Chinese and it is highly
recommended by the Chinese government. Thus, it has become a hot commodity in China.
• Opportunity of recruiting the Chinese sales agents due to high demand of bird’s nest that is
not available in China
• Looking for countries with higher purchasing power
• Desire for forming a public listed company by having distinctive business model and
outstanding achievements which focusing on foreign markets.
• Opportunity to international markets from domestic customers or partners
• Entering to international market due to the connection of many aspects which are related
to their own companies.
• Found a local right partner who capable to manage the restaurant in the international
market.
• Based on former employment's clients, who has approached them directly after they have
established their own companies.
• Recommended by Malaysian clients who know international clients
• Actively participating in the exhibition.
• From their university programme as they were studying at the same university.
• Local translator of the targeted market and became a friend.
• Need to invest time and money in managing international relationships.
• Entertainment and have fun while going to partners' countries or vice versa to enhance
relationships
• Initiate in visiting client's company or vice versa and organize seasonal events regularly.
• Trust is a key element in managing relationships, and it exists because of knowing each
other and understanding counterparts' behaviors.
• No deception
• Using social media such as WhatsApp, WeChat to contact international partners, update
the information and maintain connection with them.
• Managing and maintaining relationships by selling another own company products in the
restaurant at the international market.
• Methods of product delivery and collection
• Cost of shipping
• Shipping agreement and export issue
• Market testing
• Volume of ordering that based on international market environment
• Roles and ownership of the restaurant & bar in the international market
• Acquisition of new customers with the assistance of local partners
• Local people provide the knowledge such as advice, information to sell abroad.
• Facilitation and assistance from the international agents
• Internationalization is depending on the company's situation and it is not a compulsary
decision for SMEs.
• International agents or users shall equiped with product knowledge if they wish to be part
of the business.
• The network is very important as it enables a company enter the international market.
Thus, university or college students are advised to connect with more foreign students while
studying at the university.
Knowledge gained from partners or clients
Knowledge shared by entrepreneurs
Intentions of entering international markets
Ways of knowing partners or clients in international markets
Investment in international relationships
Managing and coordinating international relationships
Practical issues of dealing with partners or clients
Opportunities in international
markets
Operation of international
markets
Knowledge and experiences
49
Figure 10. Data structure
Each of the aggregate dimensions and themes are briefly explained in the following
sub-sections, which are corresponding to the research context and theoretical
framework.
4.1 Opportunities in international market
Based on the finding, opportunities in international market consists of the intentions
of SMEs entrepreneurs while entering international markets, and the ways of knowing
their international partners or clients.
a) Intentions of entering international markets
Anderson (2011) stated that profit and aim for growing are the main drivers for SMEs
internationalization. However, the finding showed that there are still many critical
reasons for SMEs entrepreneurs to enter international markets. Apart from increasing
the business and sales revenue of companies, other important reasons include high
demand of their products from foreign customers, internal and external motivation,
strengthen networks by getting more international counterparts or clients, and enhance
knowledge. The findings are in line with Abdullah and Zain (2011) regarding the
reasons for Malaysian SMEs internationalization, except for the enhancement of
• Knew each other during university time and had fun together. After completing the study,
starting to have a business transaction.
• The counterpart is the entrepreneur's international translator and now becoming good
friend.
• International partners and customers have switched from business partners to good
friends, and some is their boss own networks.
• International customers are belong to the company, seller and clients relationships.
Business network
• The relationships between these international clients are dependable on each other.
• Strong position within the international relationships because international partners need to
rely on entrepreneur's to operate business.
• The entrepreneurs are willing to maintain and increase their commitment level with the
international clients.
• Delay payment is the main factor that leads to lower commitment and discontinue of
relationship with the international partners/clients.
• Mainly due to market potential such as the increase of sales.
• Expanding business to other regions/partners in China gradually.
• Expanding and desire for forming a group.
• Increase number of international agents.
• Increase business network of the company without creation of new idea.
• Business opportunities and new networks generation from the interactions with
international agents.
Development of international markets
New relationships and creation of business ideas
Guanxi (personal network)
Positioning in the networks
Degree of commitment
Networkrelationships
The future of international
markets
50
knowledge. Knowledge enhancement is part of the professional development category
which motivates firms to internationalize (Harder, Lamm & Vergot III 2010).
Company B: “We wanted to sell abroad because we wanted to expand our business,
sales, and build our company’s networks more stronger ”
Company C: “I hope to expand my company’s business networks, increase revenue
and to get more international partners or clients from the existing partners and
customers.”
Company D: “The purpose of going abroad is because the company would like to
increase revenues… Yes money... and want to know more people, get more customers,
and expand our business networks...also to get more knowledge...”
Apart from that, two SMEs entrepreneurs mentioned that opportunities to enter
international markets are because of the domestic partners or customers, which mean
they push entrepreneur to go abroad.
Company C: “I think that my company’s product will go abroad because I have
business relationships and interactions with existing Malaysia partners or clients. In
other words, they push me to the international market...my Malaysian networks are
related to the international networks.”
Company D: “Our international partners and customers are related to the Malaysia
business networks and we have the relationships...We have international partners and
customers.”
Since there is low demand of the company’s products in Malaysia, the entrepreneur
looked for countries with high purchasing power to sustain their businesses. Similarly
to the finding from Senik et al. (2010), industrial factors such as attractive markets will
lead to entrepreneurs go to international. Those reasons triggered SMEs to go
international rather than focus on small domestic market.
51
Company B: “We are now selling pure bird’s nest to China and Taiwan markets
because this product has a low market in Malaysia, so we must go to the foreign
markets to increase our company’s sales. If you only focus in Malaysia, this business
is hard to survive and sustain...”
Company A1: “We will go to China because China has the largest population; we
think that we could earn revenues from there. We seldom focus in Malaysia, because
the products are difficult to sell, the price is too competitive, and there are many
competitors… ”
Johanson and Vahlne (2009) stated that interesting business opportunities could be
possible causes for firms to expand a business to a foreign market. A product is getting
popular in an international market due to high demand from the local community has
attracted Malaysia SMEs to enter that market. For example, the bird’s nest is perceived
as a healthy supplement among the Chinese, and the Chinese government highly
recommends it. Thus, the bird’s nest has become a hot commodity in China. Besides,
the entrepreneur felt fortunate as he was able to recruit the Chinese sales agents at the
time of high demand for bird’s nest.
Company B: “In recent years, especially the Chinese government and people always
encourage having bird’s nest and perceived it as a healthy food product. So it is a very
hot commodity recently, so we mainly aim for the Chinese market. In particular, the
pure bird’s nest in the Chinese market is huge. As long as you can sell pure and
genuine bird’s nest in China, then your business can be sustained.... So, I tried to ask
them whether they are interested to be agents or not...”
One entrepreneur said that knowing a local right partner who is committed and capable
of managing a business in the targeted market has motivated him to enter that market.
This phenomenon is related to the revised model of Uppsala internationalization
(Johanson & Vahlne 2009), they illustrated that firms’ relationships and networks
could trigger them to internationalization. They think that firms go abroad because
they have significant relationships with partners who are participating in developing
the business to international markets.
52
Company A2: “For the instant beverage company, I would like to go foreign market
like Vietnam, but I cannot find the right agents… But I have a Vietnam friend who
capable to manage the restauran business, after several round of discussion we
starting to cooperate with opening SOP in Vietnam…”
b) Ways of knowing partners or clients in international markets
The analysis shows that there are four ways for entrepreneurs to know their partners
or clients. The most common method is to participate in exhibitions actively. SMEs
can know new partners, clients or anyone from an exhibition and this is the most
effective ways of expanding their company’s network and internationalization. This
phenomenon is in line with the studies by Senik et al. (2011), most of the experts
recognized that local or international exhibitions and seminars are considered a proper
channel for SMEs to create more networks within inside and outside Malaysia.
Besides, a middle person is a suitable connector in linking one person to another.
Kontinen and Ojala (2011) stated that the third party prefers an exhibition organizer
could facilitate the network relationship in between buyer and seller. This statement is
connected to our findings.
Company A1: “The instant beverages company entered to Chinese market because I
knew a Malaysian organizer who was responsible for the exhibition. I got the
information and network from him.”
Company B: “Okay... We will go to China to participate in the exhibition, to improve
our quality, and then we can meet new customers during the exhibition, and then we
can increase our sales revenue. We will go to China once a year. There are many
places in China that have bird’s nest exhibitions in a year, the exhibition will be
organized in Shanghai, Guangzhou, Nanning, and Beijing, mainly in big cities. I had
participated in the Shanghai and Guangzhou exhibition before..”
Company D: “Our company knew these international partners and customers through
exhibitions, and the opportunities are also from the exhibition. Our company
participate two to three exhibitions a year.”
53
Secondly, entrepreneurs know international counterparts because of the domestic
counterparts. Johanson and Vahlne (2009) stated that a firm could enter a foreign
market because it has good relationships with some important partners, they can be a
home or local partners.
Company C: “I knew my Japanese client from my former company that I worked
before. Once he noticed that I have my own company, and then he contacts me directly
to request my graphic design and printing services. Then, I got my Singapore clients
from existing Malaysia clients, because he satisfied with my printing and quality, so
he introduced his friends to me. Besides, I knew another Singapore client from an
existing Malaysia clients.”
Thirdly, an interesting finding is that the entrepreneur knows his current partners (i.e.,
the Chinese market) from previous university programme, where they were studying
at the same university. Senik et al. (2010) highlighted that networks and relationships
are perceived as a significant role to bring SME to international markets especially
from personal relations, such as friends, students, colleagues, family, or relatives. This
could be seen that those partners or clients who know the entrepreneur during their
campus life are useful and easy to approach when it comes to an international market.
Company B: “Yes, I knew them while studying at the university, and we keep in contact
with each other until today.”
A network relationship with a foreign partner or client could lead the SME
entrepreneurs to internationalize. One of the entrepreneurs hired a local translator for
his previous business, and after a few years, they became good friends. He then utilized
this network opportunity to enter the Vietnamese market by establishing a new
restaurant. This is because his friend is from Vietnam and he is familiar with the market
and culture. Coviello and Munro (1995) stated that network relationships of a company
affect the international market decision.
54
Company A2: “My Vietnam partner is my friend. It was my previous translator, then
we start cooperating for opening a restaurant in Vietnam as he is familiar to local
culture.”
4.2 Operation of international markets
While operating in the international markets, the actions and behaviors of SMEs
entrepreneurs are considered essential to them in continuous development in that
markets. In general, the issues such as investment in international relationships,
managing and coordinating international relations, and practical issues of dealing with
partners or clients are the main activities in the global markets. Other than that,
problems and dilemmas are a typical process that happens while operating abroad.
a) Investment in international relationships
Most of SMEs entrepreneurs highlighted that they need to spend time and money in
managing the relationships with their international counterparts. They will have
attended to informal activities, such as entertainment, drinking, eating, and organizing
seasonal event regularly. However, they consider such informal activities as an
investment to enhance their network relationships. This finding is contrary to Yi and
Ellis (2000) that argued creating and maintaining guanxi relationship has been
perceived as a disadvantage because of time-consuming and expensive. In contrast,
the finding reveals that some of the interviewees think that guanxi is essential
especially in dealing with Asian partners or dealers. This finding is coherent with Fan
(2002), which shows that guanxi is a significant factor when managing business in
China as it is an essential aspect in every enterprise, however, merely managing guanxi
is not enough for achieving business success.
Company A1 and A2: “Sometimes I will go to China and Vietnam to meet them, and
we will talk about business when eating or drinking. I just need to spend some time to
talk with them and keep in touch to maintain our business relationships, of course, I
need to spend a certain amount of money on these relationships, and it is kind of
investments.”
55
Company B: “If I go to China, such as Shanghai, I will contact those agents who stay
nearby and then we will come out to meet and have fun. Also, if they come to Malaysia,
I will meet them and bring them to eat and entertain them. Maybe I will accompany
them for two or three days. It can be said as entertainment and enhance our friendship.”
Company C: “This is very common in Malaysia, drinking, or need to spend more time
and money, these things are sometimes not what you want, but because of the
environmental impact you need to do it..”
Company D: “My boss will go to foreign countries to meet his partners and customers
from time to time, or they will come to Malaysia sometimes... example during the
durian season, my boss will invite them to Malaysia enjoying and taste durian, this is
a way to develop good relationships with them... Whether it is in Malaysia or in a
foreign country, we always invest time and certain money in relationships with
partners or customers. It is a must in order to build good relationships.”
b) Managing and coordinating international relationships
As compared to the investment in international relationships, this thesis classifies
managing and coordinating relationships as a formal way of entrepreneurs in managing
and strengthening their network relationships with foreign counterparts or clients.
Johanson and Vahlne (2009) highlighted that learning to coordinate a relationship
between partners is crucial. Trust has been known as an essential element; it has been
shown in the research on relationship development (Morgan & Hunt 1994) and
business networks (Johanson & Mattsson 1987). Our finding is significant to the above
statement; all interviewees emphasized that trust is a crucial element in managing
relationships and no deception in the business transactions. Although it had been
decades ago, trust is still considered a vital component of developing and maintaining
relationships.
Company B: “Because we knew each other before, so we will have trust. It enables me
to enter international markets easily. It is impossible to find someone who does not
know and sell him...people will not believe you, so I will be easier than others because
we knew each other. So our trust is developed among each other.”
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Company C: “I have long-term business relationships with these customers, we knew
each other’s behaviors and trust each other, even if they want to us to provide them
designing and printing services, we will do it for them even they have not paid yet. We
believe that they will make payment to us once they have received the products... Trust
is very important to manage the relationships.”
Based on the data, the advanced technology such as social media (e.g., WhatsApp,
WeChat) enables most interviewees to go international market conveniently. They
posted their products on social media and updated their business performance among
the existing customers. Such information serves as evidence that the business is active
and possible to attract new customers. Besides, they use social media to contact
international partners frequently, exchange information, and maintain the connection.
This is considered one way to build trust among them. This phenomenon is in line with
Abdullah and Zain (2011) stated that the development in information and
communication technology (ICT) had increased opportunities for SMEs to broaden
their business abroad. Specifically, ICT resolves communication problem, especially
for a long distance business.
Company A1 and A2: “Mostly, I used WhatsApp to keep in touch with my international
partners, the most important is trusting each other and reliable...and not to deceive
them..”
Company B: “Nowadays WeChat is very convenient for us to contact. Then we will
update the information regarding the bird’s nests, inquiry, and customers’ orders to
prove that we are still doing this business...These actions repeatedly, thus, show that
the deception is relatively few... we often update, and put transaction records, and also
upload customers’ remittance, these actions will increase the trust...and long
friendships with our agents, so we do not have any communication problems...”
Company D: “Yes, the most important thing is to use WhatsApp, WeChat to contact
with international partners and customers, and trust is also important...”
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c) Practical issues of dealing with partners or clients
Based on the data, two out of five interviewees mentioned about dealing with the
shipping issues—for example, the methods of product delivery and collection, cost of
shipping, shipping agreement, and export issue. Knight and Cavusgil (2004) stated that
the rapid growth for a business to an international market could be due to the advanced
information and communication, transportation and logistics. The entrepreneurs
appreciate the advanced communication and transportation recently which enables
them to discuss the delivery issue more appropriately, and further, they can deliver
product smoothly in a short time.
Company B: “I need to find the right method to deliver the product and understand
extra fees that will be imposed. Everything I started from zero. I didn’t understand
these things at first, just to learn and explore slowly.”
Company C: “I will send his products to Japan or elsewhere he will collect by himself
when he comes to Malaysia…and we will discuss the weight and cost of delivery, which
cannot exceed the estimation.”
Apart from that, the tested of international market has carried out in the early stage
which had created positive outcomes for the entrepreneur to further develop in that
international market. He decided to enter the market by exporting and they would like
to further expand in the future. This situation is slightly similar to Swedish companies
which entered international markets by exporting at the beginning (Hörnell, Vahlne &
Wiedersheim-Paul 1973). They deal with intermediaries or agents of the local
companies (Johanson & Vahlne 2009). Besides, the entrepreneur mentioned that the
volume of orders is based on international market environment.
Company B: “at first my friends are willing to try for selling the bird nest, and to know
the preference of local customers... then because we have more sales then we continue
this business deal until today. Some of my friends only buy for themselves…then they
will introduce more friends to me if they like the taste and the quality, so my
international customers have been increasing. Some of my friends are agents, and they
have their shops in China. Some of the shops are bird’s nest dessert shop, some of
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them will sell to the relatives and friends, there are total nine agents in China, and
Taiwan is currently one.”
Company B: “The quantities of selling are not fixed and depend on their sales, During
the New Year and the Mid-Autumn Festival, they might import double or triple than
as usual…during these festivals, many of Chinese will purchase and make it as a gift,
bird’s nest as a gift is very common in the Chinese market...”
While dealing with an international partner, the roles and ownership of a business in
that international market is crucial to be discussed and negotiated clearly to avoid
unnecessary business dispute in the future.
Company A2: “The instant beverage products produced by my other company are
selling in the restaurant & bar... Example: the ice lemon tea served in the restaurant
& bar is produced by another company of mine... So we sell it to SOP restaurant &
bar in Vietnam. Although those responsible partners are new but they are responsible
for their roles...so our company takes 60 % shares and my partners take 40% shares,
then they only need to work hard...”
4.3 Knowledge and experiences
This dimension is related to the knowledge and experience possessed by SMEs
entrepreneurs in their work profession. Besides, they have gained new knowledge and
information from their international partners or clients while dealing with them. This
finding is in line with Davies, Leung, Luk and Wong (1995) that demonstrating a
guanxi network could be claimed as a source of information. Further, well-maintained
guanxi induces knowledge sharing between parties while operating in international
markets.
a) Knowledge gained from partners or clients
While dealing with international partners or clients, most SMEs entrepreneurs gain
knowledge through exchange opinions or information sharing. The local partners or
clients are willing to provide advice, the latest news, information, or even new
opportunities to operate abroad. This finding is similar to the statement claimed by
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Fuller-Love and Thomas (2004), a company can stay at the forefront of legal aspect,
technology development, and other essential aspects have come from the information
provided by network actors. A critical remark is that due to mutual trust, SME
entrepreneurs receive assistance and facilitation from their local agents when they
were in need of support in the foreign markets.
Company A1 and A2: “From the China agents, I learned that Chinese people like the
imported coffee and coffee beans. In Vietnam, I know that Vietnamese people are
willing to spend money. Although they are low income, such as MYR1700 for a month
but they are willing to spend MYR700 on for eating and drinking. These information
are shared by my partners because of trust… we knew each other and long
relationship…we share this kind of information during our drinking time or having
meal”
Company B: “I knew these Chinese agents while studying at the university; they gave
me the opportunity and assisted me to enter the Chinese market.”
Company B: “Other than getting information from my agents, they also mentioned no
deception during the business transactions… No unethical processing in the bird’s
nest, they want 100% natural, and then as long as you have completed the first
transaction, it will be easier to do business later. Although the color of natural and
genuine bird’s nest is not as good as expected, but they don’t mind, they just afraid to
about fake bird’s nest.”
Company C: “They are local people who provide me the knowledge, latest news and
information, and opportunities to sell abroad…those are really useful for my business...
for example, local things are not good, no good quality and the pricing issues...”
Company D: “We have gained knowledge and experienced… and also information
from our international partners and customers while operating in international
markets. However, they mostly talk to my boss only... in fact, this industry emphasizes
on experience, the more experience you gained, the better for your company.”
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b) Knowledge shared by entrepreneurs
One entrepreneur mentioned that internationalization is depending on the company’s
situation and it is not a “must” decision for SMEs.
Company C: “I have to say, going to the international market sometimes depends on
the industry. Some industry doesn’t pay much attention to go to the international
market…but for my industry, still okay, if got order then we will do, the more the better.”
Apart from that, some entrepreneurs emphasized that the network is vital as it enables
a company to enter the international market. This phenomenon is in line with
Johansson and Vahlne (2009), a firm internationalize is depending on its relationships
and network. Thus, university or college students are advised to establish a connection
with more international students while studying at the university
Company A1 and A2: “For me, the network is very important for my companies to go
to the international market.”
Company B: “Networks are very important to me as it enabled my company to enter
the international market. I wish I could know more Chinese and Taiwanese during my
university time as my university is an international university.”
One SMEs entrepreneur recommended that international agents or users shall equip
with product knowledge. With sufficient knowledge, they can differentiate the genuine
versus non-genuine product, and able to recognize the non-genuine product that might
harm to consumers.
Company B: “The Chinese’s knowledge of bird’s nest is not that strong, because it is
just turning popular in this few years. I think if they want to do bird’s nest business or
like to eat bird’s nest, they may wish to enhance their knowledge of bird’s nest.”
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4.4 Network relationships
The finding presents that guanxi (personal network relationship) and business network
exist among the Malaysian SMEs in internationalization. Besides, the position of
SMEs in their international networks and their commitment level to their networks
were analyzed, and the result reveals favorable outcomes.
a) Guanxi
Luo (2007) stated that guanxi is significant in Chinese society and has been known as
an inevitable factor in managing the business with a Chinese businessperson for
decades. Chinese ethnic firms tend to a foster personal relationship in their business to
ensure their business could be performed smoothly. From the interview data, one
entrepreneur said that he knew his business partners during university time and had
experienced fun together. After completing their studies, they started to have a
business transaction until today because of good personal relationship. As Luo (2007)
mentioned that developing and maintaining guanxi is common attention occurred to
entrepreneurs, managers, officials, or even university students.
Company B: “It is my own personal relationship. During university time, we just
students only, no business deal at all. We had fun together. Then after completing the
study, I started to know about bird’s nest opportunity and coincidently they were in
their own country.”
Apart from that, findings revealed that one of the entrepreneur’s counterpart was his
former business translator, they keep contacting and maintaining the relationship,
further becoming a good friend and now they are operating a new business together.
Yeung and Tung (1996) illustrated that guanxi could support and reinforce because of
continuing connection and interaction. Positive consequences can be occurred if well
maintaining this relationship. Also, the data demonstrated that international partners
and customers switched from business partners to good friends, and some of the
international business network relationships are derived from the business owners’
personal networks.
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Company A2: “This partner used to be my translator and now we are a good friend.
Besides, I saw that it was a business opportunity.”
Company D: “These international partners and customers have switched from
business partners to friends, and some is my boss own networks...”
b) Business network
One entrepreneur illustrated that his relationship with international partners belongs to
the company’s network, and he gained a lot of information and knowledge from them,
even there are only seller and client’s relationships. This finding is a coherence to
Johanson and Vahlne (2009), which explains that a business network is viewed as a
firm can acquire knowledge about its partners such as their needs, capabilities,
resources, and other through the exchange in a network.
Company C: “I will say that my business relationship with those international partners
is belonged to the company, rather than myself personally. They will tell me their
ability and needs…and also give me useful information”
c) Positioning in the networks
Two out of five entrepreneurs expressed that they have a strong position within the
networks because their international partners need to rely on them in the business
operation, which means that they are considered as significant partners within their
networks.
Company A1: “My instant beverage company has a quite strong position with these
international partners; some of them need to rely on my machine to operate.”
Company D: “Many industries have to use our products and machines to further
produce their products. For example, the automotive industry, the air-conditioning
industry, the hardware industry, heavy industry, ships and aircraft need to use these
products and machines, so our position in this network can be considered strong. We
need revenues and they need our machines.”
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Meanwhile, three entrepreneurs indicated that the relationships with these
international partners or clients are considered dependable and they enjoyed the
relationships with them. Johanson and Vahlne (2009) illustrated that actors within a
network would engage in numerous interdependent relationships. They need those
relationships to ensure a smooth operation in international markets.
Company A2: “The restaurant position in this network is considered good because we
need each other to operate business and my partner could provide the knowledge and
experience which achieved requirement.”
Company B: “I feel that we are only at the beginning stage. we need each other. They
can get reasonable prices and natural bird’s nest from us...We also need them to help
us sell these bird’s nests. I think both sides need each other; we have relied on each
other...”
Company C: “I think that the relationships between these international clients are
considered well and the relationship with one the Japanese client is actually quite
closed. He needs our company service because he likes our design, ideas, suggestions
and printing quality. He will come to us every month and we are welcome him and
happy to serve him and he will bring some business for me.”
d) Degree of commitment
Johanson and Vahlne (2009) mentioned that the commitment level of a firm to its
counterpart will change, either increase or decrease the commitment in the relationship.
The finding revealed that all SMEs entrepreneurs are satisfied with their network
relationships with international partners and clients. They are willing to continue
maintaining and increasing their commitment level with their partners and clients. The
finding is consistent with Johanson and Vahlne (2009), which explains the extent of
commitment would persist and increase within a network relationship when a firm or
partner evaluates the relationship favorably.
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Company A1 and A2: “I would like to maintain a moderate commitment level with my
Chinese agents and will increase my commitment level with my Vietnam partners.”
Company B: “I feel that the relationships in between my agents and me are not only
in term of business relationships. We considered our relationships as a good friend. It
is not just a money transaction. When they came to Malaysia, I will go to meet them
and had fun together...I would say that we are in good relationships...a very worthy
relationship.”
Company C: “From the past until now, the company relationships with those
international clients are maintaining and also increasing, we will commitment more
in the relationships…not decrease. But if the payment is not up to our expectation, we
will have a lower commitment level with that client or company, and we do not want
to continue...it is better for us to move forward by finding other new international
clients...”
Company D: “For sure, our company would like to increase the commitment with
these international partners and customers as they created positive outcome... but is
depending on the situation.”
4.5 The future of international markets
Mostly, SMEs entrepreneurs think about their future in the international markets when
operating abroad. Therefore, the development of international markets, new
relationships, and the creation of business ideas have been analyzed.
a) Development of international markets
According to the data, some entrepreneurs wished to increase the number of
international agents in the international markets. Others illustrated that they are
gradually expanding their business to other foreign regions to get more revenues.
Besides, one entrepreneur said that he and his partner have been discussing and
communicated well about their future business. They wished to open a second
restaurant in that market and intended to expand the business to other countries. A
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finding that is in line with Granovetter (1985) stated that the actors would share
development mutually and willing to give away individual power for a specific task
when the actors in a relationship are connected.
Company A1: “Currently, I have one Chinese agent, and for the second agent... we
still discussing the contract. I would like to expand my international network by finding
more agents, but for now… I do not look for it because I want to focus on researching
my beverage products.”
Company B: “I have Chinese friends in China. Because the sales in China are quite
good, so I will start slowly and develop this business...I will find more agents and
customers or recommend by my current partnes.Usually, 90% of my company’s
revenue is from China… we wish to expand this business to those countries that people
want to buy and consume bird’s nest...but the Chinese market is still the biggest. Most
of the bird’s nest in the world is sold to China.”
Company A2: “ I have discussed with my partner, as long as this first restaurant
operates well, then they do not need to come out any money for the second restaurant.
Our company will come out all the expenses and they just need to manage. This is what
we are going to do...If our companies operate in this way, then we will be easier to
enter other countries in the future, and there are many subsidiaries in my group, which
can be connected.”
b) New relationships and creation of business ideas
The new relationships and creation of new knowledge and business ideas exist in the
network relationships between entrepreneurs and their partners or clients. Johanson
and Vahlne (2009) stated that exchange and interaction with network partners allow a
firm to gain new knowledge. The finding showed that three out of five entrepreneurs
highlighted that they learned business opportunities, product knowledge, and new
networks through the interactions with international agents.
Company A2: “In Vietnam, I have new international networks and we plan to have
more franchises.”
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Company B: “I can expand my networks through my agents, and some product
knowledge and business opportunities have created during the interactions with them,
such as Ophiocordyceps sinensis – it is an expensive traditional Chinese herb which
can only be produced in China, they explained the positive effects could bring to
consumers, thus I import it from them because of the reasonable price... without the
cost from the middleman. The price that they offered to me is considered low in
Malaysia market. Another business opportunity is importing abalone from my agents;
the abalone in Malaysian is imported from China. I received many benefits directly
from my agents, for example, price, business idea…So I got the advantages compared
to other people.”
Company D: “Our company is able to expand networks in international because of
these international partners and customers... then we have more businesses… besides,
there are business opportunities during interaction with them, but my boss is more
conservative, he thinks to focus on this industry, he does not want to go to other
industries.”
Sometimes, it is not easy to discover or identify a new business opportunity and
network through counterparts, but with having trust with each other in the relationship
might resolve this issue. Johanson and Vahlne (2009) highlighted that trust is essential
in the beginning stage and also for a long-term relationship, in which an opportunity
can be created and exploited in the relationship.
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5 DISCUSSION
5.1 Key results
The finding of this thesis revealed that networks serve as a critical factor for Malaysian
SMEs to internationalization. This result is coherent to the existing international
studies which stated that the network relationship is useful to assist and enable firms
to penetrate foreign markets (Coviello and Munro 1995; Johanson and Mattsson 1988;
Zain and Ng 2006). Figure 11 presents an empirical model that illustrates the
internationalization of Malaysian SMEs through networks approach. In this regard,
this empirical model serves to explain the two research questions as formed in Chapter
1.
Figure 11. The internationalization of Malaysian SMEs through networks approach
Malaysian SME entrepreneurs
Internationalization• Partners or clients
Opportunities in internationalmarkets
• Intention of entering international markets
• Ways of knowing partners or clients in international markets
Operation of international markets
• Managing and coordinating international relationships (Formal)
• Investment in international relationships (Informal)
• Practical issues of dealing with partners or clients
The future of international markets
• Development of international markets
• New relationships and creation of business ideas
Networks• Guanxi• Business network
Knowledge and experiences
• Knowledge gained from partners or clients
• Knowledge shared by entrepreneurs
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Research question 1: How do networks affect Malaysian SME entrepreneurs to
discover international opportunities and to operate their business in the international
markets?
Opportunities in international markets
First and foremost, this model identifies two core elements that lead to the discovery
of opportunities in international markets among Malaysian SME entrepreneurs.
There are nine intentions of Malaysian SME entrepreneurs to go abroad:
1. To increase sales revenue and profit
2. To expand and strengthen networks of company
3. To sustain their business due to low demand in the domestic market
4. High demand or shortage of supply for their products in the foreign market
5. Entrepreneurs’ internal and external motivations
6. Foreign markets adviced by business partners or clients
7. Attractive market
8. Interesting business opportunities, and
9. To enhance knowledge
Besides, this thesis found that Malaysian SME entrepreneurs could know more
international partners or clients through attending exhibitions regularly and partners
from previous business collaborations, which is in line with Senik et al. (2011).
Interestingly, the findings revealed that international partners or clients could be
known through a relationship with a former freelance worker, a well-established
friendship during university life, and recommendation by partners or customers.
A relationship with a former freelance worker is where a non-committed business
relationship has changed to a personal relationship, and due to mutual interest and
benefits gained in an international market, this relationship later switches to a business
relationship in the international market. The explanation given is that both parties
maintain good contact with each other and this has increased mutual trust, thus turning
them to business partners.
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A well-established friendship during university life is where entrepreneurs keep
contacting and maintaining the relationship with their university friends. Thus, when
entrepreneurs wish to internationalize a product to a specific foreign market, they
could seek help from their university friends—who are currently staying in that
country to conduct market testing. Entrepreneurs could further ask for a
recommendation for a potential business partner if there is a positive result of foreign
market testing.
A recommendation by partners or customers occurs when entrepreneurs have built a
positive reputation with their existing domestic and foreign partners or clients.
Subsequently, their current partners or clients are willing to recommend them a
business partner of an international market due to the entrepreneurs’ credential.
Operation of international markets
Figure 11 shows that Malaysian SME entrepreneurs use two distinct forms (i.e., formal
and informal) in handling the operation of foreign markets. A formal form is referred
to managing and coordinating a relationship with their partners or clients by focusing
on the trust element, which ensures no deception during the business transaction. Trust
is a significant element and exists in many types of research such as relationship
development (Morgan & Hunt 1994) and business networks (Johanson & Mattsson
1987).
Another way of building trust is by using social media, such as WhatsApp and WeChat
to manage and coordinate the relationships with their partners or customers. First,
social media solves a long-distance communication problem (Abdullah & Zain 2011).
Second, social media app (i.e., WeChat) mitigates remittance issue as this app is
equipped with online banking feature. That is, Malaysian SME entrepreneurs could
receive payment from any business partners as long as they have activated their
banking features on the app. Thus, the finding of this thesis suggests that WeChat is
essential to Malaysian SME entrepreneurs in managing and coordinating their
relationship with the Chinese business partners. The reason given is that WeChat has
a direct impact on trust forming since it relates to business operation, such as payment,
discussion of shipping method, cost of shipping, shipping agreement, export issue, and
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after-sales follow up. Further, the Chinese business partners could follow
entrepreneurs’ public posts regarding their products update, the status of the company,
comments, and inquiries from the existing or other business partners.
An informal form refers to entrepreneurs are willing to spend more time and resources
to participate in informal activities that are not related to the operation of the business,
such as personal treats for entertainment (e.g., drinking and Karaoke), pub crawl, food
hunting, private tour guides, and other informal event (e.g., durian festival). The
finding revealed that Malaysian SME entrepreneurs consider the listed informal
activities as a way of maintaining and improving the relationships with their Chinese
counterparts, rather than perceived as time-consuming and costly operating activities
that argued by Yi and Ellis (2000).
The role of networks in the discovery of international opportunities and operation of
international markets
The findings show that networks play a crucial role to assist and enable Malaysian
SMEs to internationalization. Many SME entrepreneurs stated that their opportunities
to international market came from their current partners or clients. Usually,
entrepreneurs utilize their existing networks to assist them to internationalization
because they do not have sufficient knowledge and experience about a targeted
international market, such as helping in market testing, seeking for business partners,
targeting market, promotion, and product distribution. In term of operation in an
international market, Malaysian SME entrepreneurs use networks to enhance their
position in the international markets. In this regard, networks contribute to the
smoothness of the operation and a profitable long-term business relationship.
Surprisingly, only one entrepreneur stated that the relationship with business partners
belongs to the company. He argued that it is hard for him to switch from a business
network to a personal relationship. Most of the Malaysian SME entrepreneurs are more
emphasizing on guanxi (vs. business network) while dealing with the partners or
clients in the Asian markets. As such, they are willing to invest personal times and
financial resources in the development of guanxi. The reason given is that fostering
guanxi with business partners could help to ensure their business could be performed
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quickly, such as business payment and operating arrangements. This finding is in line
with Davies, Leung, Luk and Wong (1995) highlighted that smooth payment is one of
the benefits of building guanxi.
Further, well-maintained guanxi overcomes challenging practical issues that require
voluntary efforts from the business partners of the international market, such as
helping in getting the approval of an application to provincial government and assisting
in the communication of customs clearance. Based on these findings, the model
suggests that Malaysian SME entrepreneurs are more interested in creating a guanxi
network that brings numerous benefits more than a business network. Thus, Malaysian
SME entrepreneurs tend to treat a business partner as a personal relationship, which is
contrary to most Western countries that view business relationships as business
networks.
Research question 2: During the internationalization, what are the influences of
networks on Malaysian SME entrepreneurs’ knowledge, experience, and future
business ideas?
Knowledge and experiences
While operating in international markets, Malaysian SME entrepreneurs could gain
valuable knowledge from their partners or clients during the interaction and exchange
of business opinions. The findings are in line with the label of learning, creating, and
trust building which is stated by Johanson and Vahlne (2009). It is a two-way process
where business partners normally are willing to share knowledge and exchange the
latest news (e.g., market trend), information (e.g., market demand), and advice (e.g.,
market testing) to the other party. For this reason, entrepreneurs would be able to
receive support and assistance from one another when a business relationship is formed.
The future of international market
The results of empirical data revealed that most Malaysian SME entrepreneurs would
consider about the future development after expanding their business in an
international market. Generally, they plan to increase their sales volume by recruiting
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more agents in that particular global market, and such phenomenon is evidenced in
China, Taiwan, and Vietnam. Apart from projecting on the current business operation,
Malaysian SME entrepreneurs are open to any new business opportunity in the existing
foreign market or expanding their current business to another new international market
with the existing international partners or clients. Further, they are willing to operate
a new business in Malaysia by importing products from the foreign markets.
The influences of networks on Malaysian SME entrepreneurs’ knowledge, experience,
and future business ideas
The finding of this thesis shows that guanxi (rather than business networks) has
tremendous influences on receiving up-to-date information (e.g., updates of the local
market) and gaining practical knowledge. The possibility of sharing detail knowledge
occurs typically with a specific person of the Malaysian SMEs, rather than anyone else
of the company. For instance, sharing happens on the business owners and during non-
business activities (e.g., drinking and private message on WeChat). The reason given
is that mutual trust will be formed whenever guanxi is built. That is to say that business
partners start trusting each other when they initiate a personal relationship between
them. Such trust forming process would encourage the sharing of knowledge and
experience between Malaysian SME entrepreneurs and their partners or clients. Trust
can replace the knowledge if an entrepreneur lacks local knowledge. As the trust is
establishing and getting stronger, Malaysian SME entrepreneurs will believe on their
partners or clients. Subsequently, they would learn and create new knowledge from
them and increase their commitment level into the relationships.
The result of empirical data revealed that Malaysian SME entrepreneurs perceived
maintaining a personal relationship with the right international partners is considered
crucial in identifying and recognizing new opportunities in the existing foreign market.
It is challenging for Malaysian SME entrepreneurs to discover new opportunities if
they do not build guanxi—an excellent personal relationship in a new business
environment (i.e., international market). Due to trust forming that resulted from
guanxi, trust helps to reduce additional effort in discovering new opportunities in the
existing global market. The reason given is that a trusted personal relationship would
induce foreign partners to start a discussion with the entrepreneurs if there is a potential
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new business. Thus, the future development of SMEs in the international market is
highly influenced by the degree of guanxi with international partners or clients.
5.2 Theoretical contributions
This thesis contributes to current literature of the Malaysian SMEs internationalization
by integrating business network internationalization process model (Johanson &
Vahlne 2009) and guanxi (Davies, Leung, Luk & Wong 1995; Lee, Pae & Wong 2001;
Fan 2002).
First and foremost, this thesis contributes to the internationalization literature by
including two aspects. First, nine reasons are found to trigger Malaysian SMEs
entrepreneurs’ intention of entering international markets. The current thesis adds to
previous literature (Abdullah and Zain, 2011) by proposing three additional reasons
for internationalization, including the Malaysian SMEs wish to expand and strengthen
its network, foreign markets as advised by business partners or clients, and they want
to enhance knowledge. Second, this thesis contributes three additional ways of
knowing current partners or clients in a international market, including from a
relationship with a former freelance worker, a well-established friendship during
university life, and recommendations by partners or customers. All of these are
connected to networks, the actors are willing to collaborate in the business as they
have established a long-tern business relationship, to which they perceive a business
collaboration could lead to mutual benefits and a win-win situation.
The revised model of the business network internationalization process serves as a
primary guideline for this study. While conducting an internationalization research,
many Western companies in the existing literature are more function to Johanson and
Vahlne’s (2009) revised model. However, differences are found in the Asian SMEs,
such as in Malaysia. Despite the facts that this revised model is relevant to the
Malaysian SMEs phenomenon, yet the main findings of this thesis show that guanxi
elements are crucial and essential in internationalization among the Malaysian SMEs.
Therefore, this thesis has created a new theoretical framework by updating the revised
model with existing theories, further, a comprehensive phenomenon for the current
Malaysian SMEs internationalization is presented. In the context of Malaysia, the
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business network is considered as a vital element, but it is not prominently emphasized
by the Malaysian SME entrepreneurs as business network and guanxi are overlapping.
In this regard, the Malaysian SME entrepreneurs are more focusing on the
development of guanxi for their businesses.
The practice of guanxi in real life business can be evidenced from Robert Kuok Hock
Nien, a prominent Malaysian Chinese business leader, or better known as the “Sugar
King of Asia,” who emphasizes on personal connections and resources throughout his
entrepreneurship journey. In 1949, he formed Kuok Brothers Ltd company with his
brother. At that time, it was a small business that merely involved rice and sugar
trading. Their business started expanded to international markets in 1973 because two
Chinese officials told him secretly in Hong Kong about the shortage of sugar in China.
Since then, Robert Kuok entered China market through established personal
relationships with the leaders in China (Hing, Cheok & Ping 2013). Besides, guanxi
can be connected in between business and politics. Robert Kuok is a formidable
representative of guanxi economics. For instance, he assists in resetting the trade
relations between Malaysia and China recently (Teoh 2018).
While dealing business within or outside Malaysia, Malaysian SMEs prefer to build
guanxi network more than the business network with their customers or business
partners as this is related to the social culture. They believe guanxi could lead to
receiving special treatment, moral supports, advices, business information and
knowledge, resources and services, or even a new contact. The interdependent
relationship commonly occurs in the Malaysian society. The culture and beliefs play
significant roles to direct Malaysia SMEs to build guanxi with their international
counterparts especially in Asian countries. Although Malaysia has different ethnics,
but they are considered group-oriented rather than individual-oriented (World
Business Culture 2019). Malaysian like to share their knowledge, information, news
and even foods with others. For instances, food sharing behavior is a way to strengthen
guanxi in the business which is evidended in Malaysia, this is entirely different from
Western companies. Western people prefer having their own meal and seldom sharing
their cuisine on the dining table (Xiong 2017; Mabel Kwong 2018).
75
Apart from guanxi element, this thesis adds to the existing literature by including the
effort of managing and coordinating international relationships (formal), and
investment in international relationships (informal). Trust is a significant element
while building and maintaining a relationship in Malaysia. By using social media (i.e.,
WeChat), it has contributed a direct impact for trust forming between actors, especially
dealing with the Chinese partners. WeChat is the largest social application in China,
which enables the Malaysia SMEs to create a public post and transparently update their
business operation, and these can be used to enhance partners’ and clients’ reliability
and validity towards them. Hofstede (2001) highlighted that Malaysia is a collectivistic
society, people desire to have a close and long-term commitment to the group and their
networks. This reason influences the society to foster strong relationships and be
responsible to the person who they deal with them. Before starting a business, it is vital
for Malaysian SMEs to establish relationships with their Asian partners; it is
challenging to conduct and operate a business without having a relationship in Asian
countries (Rothenhorst 2018). For Malaysian, the relationship is more critical to build
than discuss the issue (World Business Culture 2019). As compared to Western
countries, Chinese focuses more on both relative and human relationship than a
economic benefit relationship (Luo 2009). They desire to have a close relationship
with their partner while doing business, which is differ from Western companies that
incline to a professional relationship rather than a personal relationship (Chalre
Associates 2019).
Typically, Malaysian SME entrepreneurs spend more time, money, and effort for
investing the relationships with their international partners or clients. These are
considered part and parcel of the social culture. For example, they will have meals
with others which are within or outside the company regularly because they perceive
such action as an opportunity to enhance their personal relationship with business
partners. Apart from that, personal treats for food and entertainment, celebrate
ceremonies together and gift giving culture are perceived as a way of creating
harmonious human relationships, which is different and to certain extend is prohibited
in the Western companies. The culture influences the actions and behaviors of
Malaysian SMEs. They are motivated in developing and solidifying a personal
relationship with their business partner. In this sense, the Malaysian SME
76
entrepreneurs normally focus on friendship forming before doing business, and
sometimes the business opportunities may occur through the relationships.
5.3 Managerial implications
The managerial implication of this thesis can be used by business entrepreneurs and
government institutions. The first implication originates from social media (e.g.,
Facebook, WeChat, and WhatsApp). Entrepreneurs are recommended using social
media (e.g., Facebook and WeChat) to search for potential international partners by
sorting their friend list. They can know the current situation of their previous college
and university friends and then connect them directly. Prospects include a local and a
Malaysian expatriate who is living in a targeted country. Since the trust and reliability
exist in the relationship, entrepreneurs could connect them easily and rebuild the
relationship. Further, entrepreneurs can smoothly enter the targeted markets because
of counterparts’ information, market knowledge, and assistances (e.g., market testing).
The second implication for business entrepreneurs is to focus on the networks,
especially in the establishment of guanxi. In Malaysia, guanxi plays essential roles in
daily business practices, and implementation of international business strategies.
Entrepreneurs have to know on how to create and develop favorable guanxi with their
counterparts in order to ensure a smooth international business expansion journey.
They are suggested to reconnect and rebuild friendship with their old friends, former
colleagues, and former business partners even though they have lost physical contacts
or do not contact each other frequently. It is better to develop the guanxi relationships
by starting sharing about their personal life or engage in online interaction before
commencing business discussion, such as Like their friends’ posted photos, Comment
or Share their friends’ online posts.
Apart from that, entrepreneurs are suggested to build common interests or hobbies with
counterparts; this serves as managing and investing the guanxi. For informal form,
they can share the wine knowledge, sports techniques and skills (e.g., golf, tennis,
cyclo-cross) and traveling experience among each other. These can use to enhance
knowledge of certain interest and strengthen the guanxi relationships. Importantly, it
helps in transforming a business partner relationship into a personal relationship.
77
Besides, reciprocal relationship mindset is recommended for entrepreneurs to bring in
their business while dealing with international partners. As the global marketplace
becomes more interconnected and accessible, new business ideas and golden
opportunities could be discovered during the communication between business actors.
Apart from expanding a business to a targeted market, the Malaysian SME
entrepreneurs also need to understand and satisfy their partners’ needs. Mutual benefits
relationship is highly recommended. That is, the Malaysian SME entrepreneurs should
also facilitate their international partners when they request for assistance to expand
their business to Malaysia. Entrepreneurs could help to enhance the business operation
and introduce networks to their partners in Malaysia.
This thesis also important to Malaysian government and institutions. They are
recommended to organize more seminars and provide more trainings regarding of how
to build and maintain a network relationship with new and existing actors. Further,
institutions should encourage Malaysian SME entrepreneurs to participate more in
government international business support program particularly in building networks.
Importantly, the Malaysian SME entrepreneurs should be equipped with the art of
turning business partnership to the personal relationship among business entrepreneurs.
5.4 Limitations and suggestion for future research
In term of limitation, this thesis only applied the network theory, internationalization
theory, and Malaysian SMEs internationalization theory to conduct the study. It might
be interesting to include learning theory in the future research, especially the inward
and outward internationalization. Future research is suggested to identify and to
explain the types of knowledge that can be acquired and shared among the business
actors.
Another limitation is that the data are collected from the Malaysian SMEs that are in
the early stages of internationalization (i.e., sell to abroad), the current findings may
not be strong enough for the SMEs which already at the mature stages of
internationalization. To strengthen the current findings, future research should cover
interviews from the mature stages of SMEs in the internationalization (i.e., a sales
subsidiary, sales office, and wholly owned subsidiary).
78
As the current thesis is focusing on the context of Malaysian SMEs internationalization
through their networks, it will be more significant if future research could be conducted
in another developing Asian country, such as Vietnam and Cambodia, to investigate
the similarities and differences elements, or to add new elements to the existing model.
The empirical data of this thesis is mainly focused on Malaysian SMEs to Chinese
Asian countries. It will be interesting to explore the internationalization of Malaysian
SMEs to Western countries, such as Europe and Americas. The business practice of
Western countries should be different from the Chinese Asian countries; Malaysian
SME entrepreneurs may need to initiate a business network instead of a guanxi with
Western business partners as they are more emphasized on professional or business
relationship. Future research may also consider a hybrid of business network and
guanxi among Malaysian SMEs when dealing with Western business partners.
The last limitation is that this thesis includes many industries while collecting
empirical data, such as from the instant beverage, restaurant, bird’s nest supplier,
designing and printing service, and hardware trading. This thesis has included two
sectors (i.e., manufacture and services provider) to examine the role of networks for
the internationalization of Malaysian SMEs. A call for future research that focuses on
one sector is recommended by comprehensively understanding the context and
phenomenon.
5.5 Assessment of validity and reliability
The validity and reliability are often used in the quantitative research, such as using a
correct set of instruments in measuring the constructs of a research framework. That
is, a construct should be operationally defined clearly with the support of previous
literature. Besides, the research framework should be statistically justified by fulfilling
the indices and assumption checks of a statistical model (Hair, Black, Babin &
Anderson 2010). However, the validity and reliability test are relatively important to
the qualitative research paradigms, and it is an essential step that should not be
neglected (Golafshani 2003).
79
In the context of qualitative research, validity is refered to the accuracy and
truthfulness of scientific findings (Le Comple & Goetz 1982), which requires
researchers to utilize the right measure, such as interview questions in response to the
defined research questions. This thesis has met the validity of research by using Gioia
methodology from a huge data into specific category of dimensions. Importantly, the
interview questions were set according to the research questions and objectives. For
instance, questions were surrounding with following topics: internationalization,
networks, business expansion, international market, international opportunity,
operation in the international market and so on. This thesis also ensures the validity by
approaching the right interviewees with the identity of Malaysian SME entrepreneurs,
and they are currently operating their business in at least one international market.
On the other hand, reliabilty could be refered to the methodology of qualitative
research, especially in regards to the consitency and stability of the data collection
(Selltiz et al. 1976). The current thesis has met the reliabity of qualitative research by
using a consistent process during the interview of five companies. That is, all the
interview questions were similar and only one interviewer was assigned to handle the
interview process. Further, the interviewer utilized a similar communication language
and platform (i.e., Skype) during the process. As a result, the findings of this thesis
should be replicated in the future study if a similar setting of reserch methods and
designs are used.
80
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7 APPENDIX
Interview question
• What motivation has driven your company to enter the selected international
market?
• Apart from scaling your business in the international market, what other
achievements that your company wishes to gain from internationalization?
• As we know that international opportunity is everywhere, however, what kind of
consideration that leads you to decide to enter the targeted international market?
• How does your company get relevant knowledge, information, and opportunity of
the targeted international market?
• Where do you get to know the counterparts/partners/clients of the international
market?
• Do the mentioned counterparts/partners/clients in the international market directly
or indirectly relate to any of the counterparts/partners/clients in Malaysia?
• While operating in the international market, any unforgettable or special
experience that you had encountered with your counterparts/partners/clients?
• During the operation in the international market, what kind of advantages does you
or your company has gained from the counterparts/partners/clients?
• Any new international network or international business idea has generated during
the interaction with counterparts/partners/clients?
• How does your company coordinate and manage your international business
relationships?
• How do you think of your company’s position within the international network?
• How important of networks to your company for entering the international market?
• Based on your company’s experience, are there any challenges/drawbacks of using
network to enter the international market?
• Will you or your company increase, maintain, or decrease the commitment level
with the international business counterparts/partners/clients? Any reasons?
List of companies
1) Company A1 : Venus Food International Sdn Bhd
2) Company A2 : SOP Restaurant & Bar
3) Company B : Malaysian Bird’s Nest; WeChat ID: soonchier93
4) Company C : Dartlife Print
5) Company D : Loyal Tools Sdn Bhd